@Preston Stevens You really think the fed helped the great depression? They increased the monetary base by over 30 billion in the 1920s, more than doubled it, this caused artificially low interest rates and malinvestments leading to the stock market crash after its boom in the "roaring" twenties. The great depression was caused by the fed when they lowered interest rates and gave out cheap credit like crazy after the dot com bubble burst, they also MASSIVELY increased debt.
It’s already well documented that he later regretted establishing the Federal Reserve, because he realized that turning over the federal banking system to private handlers was suicide. He practically mistakenly abandoned and sold out the lives of millions of innocent people, HIS people.
+Alan Fox The depressions in the 1800's were many and the Great Depression (before the fed had real power) were far worse than our recessions today. There were many panics and depressions lasted 5 years, which is minuscule compared to post Great Depression times.
Alan Fox If you are a saver, then you should definitely invest your money into bonds that give you an interest rate. Or buy an index fund that historically averaged over 8% return per annum. Savers shouldn't just sit on cash, there are plenty of ways to beat inflation. Better yet, buy an MLP stock right now, because that market is super cheap right now and offering 10% to 60% annual dividends. Buy KNOP. Or CEQP which has 35% plus sustainable dividend backed by good contracts.
A Canadian coffee shop has opened a Bitcoin ATM, becoming the first business to do so. Do you use Bitcoins or other alternative currencies? Watch our video featuring Professor Larry White, in which he recommends taking away monopoly control of money from the United States Federal Reserve System. #federalreserve #libertarian #liberty #economics #bitcoin
The FED is a federally chartered corporation. It is neither a public agency nor a private corporation. The Congress can alter or revoke the FED's charter at any time. The shareholders in the bank are American's many banks who are required to buy a certain number of shares that they may not sell. They are paid a small dividend annually. The VAST majority of FED earnings are paid to the US Treasury. Those are the facts.
"I'm annoyed that there isn't more to learn" The first stage of wisdom is knowing what you don't know. If you ever arrive at a point were you believe there is nothing more to learn,then you can be assured that you are no longer learning. There will always be those who know far less than you,but there will also be those who know far more. We must recognize the value of new information,and our challenge is reconciling the apparent contradictions. With a whole view,you'll see no contradictions ;)
I would argue that the crash was also caused by 1. Deregulation of the financial system 2. Lowered long term interest rate through Globalization 3. Tax Cuts for the wealthy Americans, allowing them to speculate 4. Lack of understanding in the International Financial System and finally lower interest rates by the Fed. (Although even if Fed have kept interest rates up, globalization would have lowered interest rates anyways.
You're partially correct. The Fed did pursue a silly deflationary policy during the depression, which made it much worse. But the US didn't have a stable financial system before the Fed. Indeed, there were dozens of severe crashes in the 19th century. The enemy is reserve lending, not the Fed. The best you can argue is that the Fed exacerbates the problem. The Federal Reserve System is not the house of cards, it is the response to the house of cards, which is Fractional Reserve Lending. =/
I would never have agreed with this guy before I got my degree in international econ. Now, I agree 100%. I am torn on the matter though, because the US dollar's strength is highly dependent on its' ability to hold the #1 spot. If foreign governments have no faith in a US reform, they may decide to hold their reserves in some other currency. That could cause some pretty serious issues.
Great Lectures, Thx! =) My questions for Mr. Selgin are: 1)In a free banking system, how are the advantages of a common unit of exchange mitigated. I can take a dollar anywhere in the world and exchange it for goods, but a promissory note from a local bank holds less convertibility. My point being, i believe it was natural for a free-market system to develop a common currency because it enables more efficient trade. 2) Free banking, or any reform, means nothing unless we end reserve lending.
So I see the 4th role for the Fed, lending of last resort where the Fed lends money to the banks when cash runs low. One thing I don't get is why did the 780 billion dollars given to the banks during the financial crises was used by the American tax dollars? It should have been lent from the Fed, not from the people who suffered from the banks!
Runner899 where do you think the fed is getting money lol. Also, even if the fed “lent” out the money, all they’re doing is printing money out of thin air and inflating the supply and thus stealing it from the people anyway
When the fed lends the money, the taxpayers are still on the hook to pay it back. Including interest. The question is, why dont we just end the fed and use the treasory to borrow or not borrow. Interest free
"Lending from the fed" is basically turning on the printer. The problem with lending from the fed is that it still affects the civilians through inflation. Every dollar not backed by a good or service decreases the value of every other dollar in circulation. And this is essentially what lending from the fed is. If the fed lends $780b, it means there will be $780b more paper currency with the exact same amount of goods and services, so the value of money in your pocket or bank account will go down. It's the same as if we were taxed $780b
I completely agree. The fellow to whom I responded asserted that if we went to a gold standard, that the 'value' of gold would actually fall even while demand for it (and therefore it's price) went up. I meant to point out that this was essentially a contradiction in terms. Value is certainly subjective. But if the price is going up with the supply essentially stable, it is because people are putting a greater value on it which results in increased demand for it.
All organizations audit themselves... It's called internal auditing. Outside (External) auditors are primarily used to ensure that internal auditors are doing their jobs properly.
# 6 Why a few bankers can print paper currency out of thin air, but you and me cannot print? The Fed lease expire in 2012, what happen? How come the Fed is still alive?
1:10 is a really important and carefully chosen statement. Notice he says "expand the amount of money in the economy faster or slower". This is crucial because it tells us that the author of this presentation understands that the money supply is set to expand perpetually within the confines of the current monetary system.
I'm somewhat confused by this video. Does it bascially state that we should replace the FED with an identical system and that would fix our problem? :/
Well, they do try to keep these videos short lest people not watch them due to excessive length. You are completely correct of course and I highly doubt anyone at Learn Liberty would say otherwise.
There is the scam called the income tax. Most people are not subjected to the income tax, because the income tax is an indirect tax. This means when a doctor is saving lives he is being tax for that activity. You think that constitution allowed to tax such activities? Not it does not. all of the federal income tax goes to pay off the interest in the national debt. Sometimes the banks get free treasury bonds and sometimes they just buy then with electronic money that was created out of thin air. Our income tax goes to pay off the interest on a piece of paper that the banks got for free. The truth is that we dont need treasury bonds because we are dealing with fiat currency that the government can just issue. “People who will not turn a shovel full of dirt on the project nor contribute a pound of material, will collect more money from the United States than will the People who supply all the material and do all the work. This is the terrible thing about interest ...But here is the point: If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People. If the currency issued by the People were no good, then the bonds would be no good, either. It is a terrible situation when the Government, to insure the National Wealth, must go in debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold. Interest is the invention of Satan.” ― Thomas A. Edison
+se7ensnakes Edison's genius was in a narrow sphere of activity and not likely to be a good source of insight on economics. He was uneducated on basic science, even. You can be sure that he knew next to nothing about macro economics - which is a lot different than the business sphere he operated in.
David J Gill Actually that is incorrect. Have you see an Econ 101 class lately. it is full of misinfo. People graduate with degrees in economics and have no idea how money is trully created or how it is affects the economy as a whole. Please refer to Steven Keen to see his uphill struggle to call attention to this problem. THEREFORE Edison is just the right person to comment because he sees the flaw in the system. In a Fiat currency we dont need bonds. What we truly need is to make banks stop counterfeiting.
We can do all of these except private currency... there should atleast be a central authority issuing currency notes. Also there should be some regulation to banking but I guess parlament could manage that ...
Hong Kong does too have a central bank. Its a de facto central bank called the Hong Kong Monetary Authority. They may have a lot less control than our Federal Reserve, as they're listed as "de facto", but since 1993, there has been something.
yes the FED is privately owned, yet its rather peculiar, no one is exactly sure who owns the fed, its leader is appointed by the government, and it was createad by an a congressional act in 1913, thats not how most private institutions are created or run. Pretty fishy if you ask me.
Correct. No one really knows who owns it. If we did, we would have someone to point the finger at other than each other. The system is running as designed. The Federal Reserve is the engine that continues to drive inequality for all. We need to stand up as a people and root out the monopolistic control that bankers have taken over our society's money. How in the world did a very, very small group of people come to effectively own the currency that we all use? Oh, and as proof of the intended misdirection, the Federal Reserve is neither Federal, nor a Reserve. When will the sheep wake up? God, I hope it is soon. END THE FED.
great video outlining many of the problems with central banking, though its a shame it seems to favour gold as the standard for a nations currency, over a free market in money/currencies that individuals are able to choose from ie: money/currency the people can choose freely.
Very interesting. I'm not yet convinced one way or the other that getting rid of central banks would improve the welfare of the people but I look forward to learning more about this stuff.
all the examples of countries you noted have centralized monetary policy they just delegate issuing authority to "private" banks ( with state ownership in a stake)
Problem with that is that community will create ONE grocery shop, creating a monopoly. There would be no choice, no preference allowed, and majorities would decide everything. However, when majorities decide things, individuals lose things.
In this last episode, the housing bubble, the home median networth went from $126 in 2007 to $77 in 2010, causing approximately 40 trillion dollar lost and wiping out 18 years of saving from the average worker.
Under gold standard banks couldn't issues more money than they had in their reserve. Without such a standard why would any bank limit its currency issuance? What mechanism could control such a behaviour?
Actually there would be very little problem since banks would trade currency for substance or credit. We are currently at a high enough level of technology that this would be nearly seamless to implement. Also, with clearing houses there would be standards to bank notes that would help facilitate currency trade. Even today credit institutions accept each other's credits as acceptable trade. Did that help?
Do you know what function the profit motive serves in a complex economy? What it does it divert resources to where they are most needed and reward people who use those resources well. A co-op working in an economy without the profit motive would be blind to these important signals, and the result would be shortages and surpluses. For an illustration of this coordinating function, look at what happens when governments impose price controls.
Fair enough, but I'm opposed to for-profit banking in any form. I think a superior system is what you have with credit unions. Instead of banks working in favor of a third party like stockholders, it makes far more sense to me for banks to work in favor of their customers. Changing that eliminates the basic incentives for banks to behave in a corrupt manner.
I agree, but the fed is a private bank that works nearly independent of the us government. I think we might need to print our money closer to where we make our laws. Whether this entitles a full dismantle/rebuild, or just a bit of restriction, is up in the air.
Yes it is,do YOUR research. Ownership in the Fed has little resemblance from actual ownership. Membership is mandatory by law,the shares cannot be bought sold or traded,nor do they carry a transferable value. Members do not benefit directly and do not control the actions of the Fed,political appointees do. Revenue made through open market operations is returned to the treasury. Fiscal & monetary policy are separated for good reasons. It's more accurate to think of the Fed as a 4th branch of gov.
there is only one one provider of construction cement where I live, and its too expensive to ship it in from elsewhere. If banks could force others out then why don't the big construction companies make a deal with the cement manufacturer to only allow them access to the product and shut out all construction competition like that? Same reason why they wouldn't do that with banks and a clearing house, it is always more profitable to appeal to a larger market than to try and shut off competitors.
Modern co-ops function within larger division of labor economies with price systems and the profit motive. So they can function using the information and coordinating features of that "greedy" system. And even people participating in a co-op are motivated by profit. They have something they want to gain, and that is lower prices. That is their profit.
I don't think it is possible to go to full reserve banking, there are so many different types of money now, repo, checking accounts, commercial paper, money market funds. And people would just start using longer term debt instead of demand deposits so I don't think ending maturity transformation would help
Google "Central Banks as Sources of Financial Instability" by George Selgin. There were other government sponsored banks before the modern central bank, and government monetary policy interfered in other ways, causing these panics. And in previous panics before central banking, depositor losses generally equaled less than 1% of GDP. In modern banking crises with central banks, losses have been as much as 20% of GDP.
Eh. I'm just drawing a comparison between now and my early 20's, when I could check out a couple books from the library, and expand my knowledge base immensely. A part of me wishes that I was capable of learning every human language in existence, so I'd have no language barrier to gaining more knowledge. I even attempted this and took German, Latin, French, and Spanish in high school. Sadly, I've forgotten all that except for a little German.
As I understand, Hong Kong *does* have a central bank. From wiki: "The Hong Kong Monetary Authority (HKMA, Chinese: 香港金融管理局 or 金管局) is Hong Kong's currency board and central banking authority. It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking". The organisation reports directly to the Financial Secretary.[1]"
perhaps they just mean that hong kong doesn't have a central bank in the sense of a monopoly of certain functions. I think they have a national currency but most commerce is done by private currency. pretty sure I saw that on stossel
Not entirely. Special privileges are granted to corporations by the state, but the corporate firm as a market organization is not a creature of the state per se.
There were a lot of factors involved in the crisis itself. The low interest rates 'caused' the crisis in the sense that if interest rates had been set by the free market (supply and demand) rather than central planning bureaucrats at the Fed, the crisis would never have happened. The situation that led to the crisis could simply, never have occurred.
If we do revert back to commodity currency, why should we not expand it to other precious metals like platinum and palladium? (Other than because it's unconstitutional)
The Federal Reserve isn't just immoral, it's illegal under under the Constitution; only Congress shall print or coin money and only gold and silver shall be legal tender. You have it backwards.
I wrote this analogy to explain fractional reserve lending: Fractional Reserve Lending is much like having copyright laws extinguish to an exclusive group of businesses. Note this analogy. If video stores were allowed to make a copy from an original and rent that copy to another Video Rental store, and rent the original to the public. The second video store similarly was allowed to make one copy to rent to a third video store while renting the other to the public. Soon everyone who cared to watch the DVD would have done so, and the video stores would have made a killing renting out cheaply priced copies. The effect is that once a person watches the film that person has fulfilled his/her need, but the DVD did not get expended (like gasoline or food) but would have continue to circulate in the community. But then who looses? The production team who labored to produce the film. Similarly money circulates in the economy from one person to another having an effect. If you have two conflicting contracts…one that maintains that you can have the money back when it is due, and the other where the money is loaned, then that is plain and simple FRAUD. To clarify this fraudulent claim lets look at what happened during the great depression. There were rumors of an economic downturn so people decided to exchange their paper money for gold. The funny thing is that the paper money was a receipt for the gold as it read: “This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank”; and “PAY BEARER ON DEMAND”. BUT… When the public lined up to exchange their receipts they found out that the banking system/treasury/government had counterfeited these receipts so that there was a total of $71.8 billion of such receipts but only 3 Billion dollars worth of gold … See Banking and Monetary Statistics (Washington, D.C.: Federal Reserve System, 1943), pp. 544-45, 409, and 346-48.
"From 1836-1913 we had a free banking system in the USA." Not quite. During that period banking was more free than most other periods. But bankruptcy laws were not consistently applied to banks. Payment in specie was frequently suspended. The National Banking System (post civil war) significantly cartelized banks. Branch banking was severely restricted. Money changers (who limited credit/note inflation) were severely regulated.
the problem is that too big to fail banks have built a dependency on the fed, believing that they'll buy toxic assets in a time of desperation. This only perpetuates a bust in the business cycle and increases inflation. some propose a free banking system, in which private banks issue their own liabilities and adjust with the market, isntead of relying on the fed to gather all the information and manipulate the fed funds rate, which only causes bubbles
East German D-marks were privatized until reunification in the 1990s at the insistence of France who vetoed reunification until Germany agreed to dismantle the highly popular and low to negative inflation private D-mark. This move was to open German banking to political pressure, foreign and domestic.
The most severe economic downturns and crises in America have occurred since the creation of the Fed, not before it, and it was the actions of the FED itself, that caused and prolonged severe economic downturns, such as the Great Depression. Then, there's the constant "hidden tax" of inflation that continues to erode the dollar's value. The Federal Reserve system is a house of cards, built on the premise of perpetual debt.
It is only possible if we move to a full-reserve banking system. Free banking would not, in itself, solve the problem of monetary instability, it would probably exacerbate it as it did in the past. Imo, if we remove the cause of the problem (fractional reserve lending), all other considerations are secondary. =) Today, it is not illegal to make your own currency, the problem is getting a wide range of people to accept it. ;)
The U.S. understood this problem come the turn of the 20th century, which is why the Federal Government adopted the unfettered coinage of gold and silver. However this too is inefficient in maintaining an economy as large as the United States. One problem with current large transaction computer stock sales on Wall Street is that if a hacker, for example, says the president is assassinated on twitter - the HUGE computer-led SELL becomes larger, the money supply shrinks, driving up interest rates
Shoppers buy a stake, which the fee to purchase a stake in the co-op is used as a pool of resources from all the "shopper-owners". The problem is that you assume that this is enough to run any co-op off of. It can be if the number of shopper-owners is at critical mass or the fee for a stake is high enough. But relying on this is risky as large unexpected liabilities will consume large amounts of the investment even with insurance. Prices still have to be set on products in order to buy more.
Banks don't simply print x10 the amount of dollars in the vault. The money multiplier is a side-effect of reserve lending. Essentially,money expansion does not happen as an internal transaction, it happens as a results of transaction between banks. It is literally an accounting glitch. Although I despise fractional-reserve lending. Also, for a bank to receive new "printed" Federal Reserve notes, it must give up a treasury security that pays interest. So the system isn't entirely rigged. ;)
It is the wants of the people that determine bubbles not the federal reserve. You could argue that the federal reserve should have tried to stop the irrational exuberance by hiking interest rates to force people into default, but the Fed itself is not the cause
In your situation, you're talking about a private monopoly. In a free market, competition drives down costs. If a company has all these undesirable traits, a competing company can offer a better deal. It's this competition that is going to drive down costs and attempt to give better service because they want to be better than their competitor. Companies are trying to provide the best service as the best price, and they want higher wages if a competitor can offer a better deal to the employee
My position has been the same all day long. You said "A government agency is also compelled to give greater accountability of it's activities to the public". I said, be careful what you wish for because revealing it all would cause the global economy to explode with little warning. Maybe we are misunderstanding one other. If that's the case I'm okay with leaving it alone.
Look up the court case "Lewis vs. the United States 1982" they dismissed the case because the court determined that the FED is not apart of the government.
Corporations were formed for the same reasons that a co-op was. A group of people share ownership in a single entity. In a modern local co-op the employees are the primary shareholders, similar to profit sharing that corporations have done for centuries. At the co-op i shop at, the owner controls 51% of the shares,and then employees that have worked there for over a year,are granted a split share of 49%. How exactly is this different from a corporation? Indeed,it IS a corporation, an LLC. ;)
Now that's interesting...so instead of ending the FED in favor of putting currency back under Congress, Professor White favors ending the FED and allowing the private sector to regulate itself. I hadn't considered that approach yet.
Actually, from 1863 to 1913, we had a National Banking system, not a Free Banking system. From 1837 to 1862 we had a Free banking system. In addition, the panic of 1837 was caused by malinvestment as a result of artificial injection of liquidity into the economy, not by the destruction of the central bank. In 1863, there were new branching regulations that were put on banks. What was the result of this? REGULAR banking panics, which you have named, and you supported my point. Thank you.
The only difference between the fed and the proposed system would be that there would be no monopoly without a central bank. The banking groups would have to compete through sound practices. With the fed, there is no real competition. That's how they get away with robbery. The solution would be to abolish the fed as proposed above, create a gold or silver standard, prevent by act of law the practice of fractional reserve lending, and subject the clearing houses to annual audit.
Demand for dollars is just being forced down, just a lot of excess supply is created with 'quantitative easing', that fuels financial speculation and artificial economic growth. Also coupled with a low base rate (the rate at which banks borrow money from the Fed) far below inflation it riggs the financial system in favour of borrowers, who will have to pay a low interest on their loans, and responsible people will have to get a small return on their savings, further fuelling the bubble.
Correct. However, for a crisis, like the one in 2008, to occur many things have to go wrong at the same time. You take away the Fed's contribution and the crisis doesn't happen.
we shouldn't just end the fed, we should build a time machine and go back to 1913 and stop if from EVER being created.
NedYarbNexus LOL you nailed it with this comments
Send them back to the bronze age.
@Preston Stevens You really think the fed helped the great depression? They increased the monetary base by over 30 billion in the 1920s, more than doubled it, this caused artificially low interest rates and malinvestments leading to the stock market crash after its boom in the "roaring" twenties. The great depression was caused by the fed when they lowered interest rates and gave out cheap credit like crazy after the dot com bubble burst, they also MASSIVELY increased debt.
Lol
Thank you Woodrow "Sellout" Wilson for over a century of struggle!
And for the IRS, he was a true socialist democrat hero
More like: woodrow "KKK restarter, confederate revisionist, irs founder, fed founder, lier" wilson
It’s already well documented that he later regretted establishing the Federal Reserve, because he realized that turning over the federal banking system to private handlers was suicide. He practically mistakenly abandoned and sold out the lives of millions of innocent people, HIS people.
The Fed should never have been allowed. Dissolve the Fed and prosecute those running it and responsible for its existence.
That way we can allow large banking panics to destroy the US Economy and send us into Depressions again! yay!
How many times was the US economy destroyed before 1913
+Alan Fox The depressions in the 1800's were many and the Great Depression (before the fed had real power) were far worse than our recessions today. There were many panics and depressions lasted 5 years, which is minuscule compared to post Great Depression times.
Derek Teed
The Fed limits depressions today by using savers to subsidize debtors. That's not very fair, and I say criminal.
Alan Fox If you are a saver, then you should definitely invest your money into bonds that give you an interest rate. Or buy an index fund that historically averaged over 8% return per annum. Savers shouldn't just sit on cash, there are plenty of ways to beat inflation. Better yet, buy an MLP stock right now, because that market is super cheap right now and offering 10% to 60% annual dividends. Buy KNOP. Or CEQP which has 35% plus sustainable dividend backed by good contracts.
End it. Period.
A Canadian coffee shop has opened a Bitcoin ATM, becoming the first business to do so. Do you use Bitcoins or other alternative currencies? Watch our video featuring Professor Larry White, in which he recommends taking away monopoly control of money from the United States Federal Reserve System.
#federalreserve #libertarian #liberty #economics #bitcoin
You should make a video on bitcoin. I'm curious to hear you guys on the subject. :)
Thanks for the suggestion!
Noted.
Still waiting on that bitcoin video. ;)
+Learn Liberty
Maybe we are returning to the privatization of money again. :)
Learn Liberty Question, how would it be profitable for me or any business like private bank or mint to print money?, can you give some details?
The FED is a federally chartered corporation. It is neither a public agency nor a private corporation. The Congress can alter or revoke the FED's charter at any time.
The shareholders in the bank are American's many banks who are required to buy a certain number of shares that they may not sell. They are paid a small dividend annually. The VAST majority of FED earnings are paid to the US Treasury.
Those are the facts.
The more appropriate question is "Can you ever end the FED?"
▄︻デ═══一҉
... yes we can...
A very thought provoking video, and it has served to increase my interest in getting an economics minor.
The Fed also has one more function: to fund Congress's profligacy.
"I'm annoyed that there isn't more to learn"
The first stage of wisdom is knowing what you don't know. If you ever arrive at a point were you believe there is nothing more to learn,then you can be assured that you are no longer learning. There will always be those who know far less than you,but there will also be those who know far more. We must recognize the value of new information,and our challenge is reconciling the apparent contradictions.
With a whole view,you'll see no contradictions ;)
I would argue that the crash was also caused by
1. Deregulation of the financial system
2. Lowered long term interest rate through Globalization
3. Tax Cuts for the wealthy Americans, allowing them to speculate
4. Lack of understanding in the International Financial System
and finally lower interest rates by the Fed. (Although even if Fed have kept interest rates up, globalization would have lowered interest rates anyways.
You're partially correct. The Fed did pursue a silly deflationary policy during the depression, which made it much worse. But the US didn't have a stable financial system before the Fed. Indeed, there were dozens of severe crashes in the 19th century. The enemy is reserve lending, not the Fed. The best you can argue is that the Fed exacerbates the problem.
The Federal Reserve System is not the house of cards, it is the response to the house of cards, which is Fractional Reserve Lending. =/
This is very true, there is no perfect system, but a combination of state and regulated markets is the best we have
I would never have agreed with this guy before I got my degree in international econ. Now, I agree 100%. I am torn on the matter though, because the US dollar's strength is highly dependent on its' ability to hold the #1 spot. If foreign governments have no faith in a US reform, they may decide to hold their reserves in some other currency. That could cause some pretty serious issues.
That ship sailed a while ago Josh…. Keep up
Great Lectures, Thx! =)
My questions for Mr. Selgin are:
1)In a free banking system, how are the advantages of a common unit of exchange mitigated. I can take a dollar anywhere in the world and exchange it for goods, but a promissory note from a local bank holds less convertibility. My point being, i believe it was natural for a free-market system to develop a common currency because it enables more efficient trade.
2) Free banking, or any reform, means nothing unless we end reserve lending.
Over time, everything moves towards centralization.
So I see the 4th role for the Fed, lending of last resort where the Fed lends money to the banks when cash runs low.
One thing I don't get is why did the 780 billion dollars given to the banks during the financial crises was used by the American tax dollars? It should have been lent from the Fed, not from the people who suffered from the banks!
That's how you know it's a scam.
Runner899 where do you think the fed is getting money lol.
Also, even if the fed “lent” out the money, all they’re doing is printing money out of thin air and inflating the supply and thus stealing it from the people anyway
When the fed lends the money, the taxpayers are still on the hook to pay it back. Including interest. The question is, why dont we just end the fed and use the treasory to borrow or not borrow. Interest free
"Lending from the fed" is basically turning on the printer.
The problem with lending from the fed is that it still affects the civilians through inflation. Every dollar not backed by a good or service decreases the value of every other dollar in circulation. And this is essentially what lending from the fed is. If the fed lends $780b, it means there will be $780b more paper currency with the exact same amount of goods and services, so the value of money in your pocket or bank account will go down. It's the same as if we were taxed $780b
I completely agree. The fellow to whom I responded asserted that if we went to a gold standard, that the 'value' of gold would actually fall even while demand for it (and therefore it's price) went up. I meant to point out that this was essentially a contradiction in terms. Value is certainly subjective. But if the price is going up with the supply essentially stable, it is because people are putting a greater value on it which results in increased demand for it.
Is there any non-gold Standard equivalent to this, though? I think that fiat currency issue would be a mess.
All organizations audit themselves... It's called internal auditing. Outside (External) auditors are primarily used to ensure that internal auditors are doing their jobs properly.
this is the best youtube channel i have ever subscribed to. Thank you!
# 6 Why a few bankers can print paper currency out of thin air, but you and me cannot print? The Fed lease expire in 2012, what happen? How come the Fed is still alive?
1:10 is a really important and carefully chosen statement. Notice he says "expand the amount of money in the economy faster or slower".
This is crucial because it tells us that the author of this presentation understands that the money supply is set to expand perpetually within the confines of the current monetary system.
You... I like you. You saved me time by posting what I was going to post. Thank you Dan.
great video.. easy to understand, too!!
and re-institute criminalizing (banning) the practice of incurring Interest on loans i.e abolishing the practice of usury.
I'm somewhat confused by this video. Does it bascially state that we should replace the FED with an identical system and that would fix our problem? :/
Well, they do try to keep these videos short lest people not watch them due to excessive length. You are completely correct of course and I highly doubt anyone at Learn Liberty would say otherwise.
There is the scam called the income tax. Most people are not subjected to the income tax, because the income tax is an indirect tax. This means when a doctor is saving lives he is being tax for that activity. You think that constitution allowed to tax such activities? Not it does not. all of the federal income tax goes to pay off the interest in the national debt. Sometimes the banks get free treasury bonds and sometimes they just buy then with electronic money that was created out of thin air. Our income tax goes to pay off the interest on a piece of paper that the banks got for free. The truth is that we dont need treasury bonds because we are dealing with fiat currency that the government can just issue.
“People who will not turn a shovel full of dirt on the project nor contribute a pound of material, will collect more money from the United States than will the People who supply all the material and do all the work. This is the terrible thing about interest ...But here is the point: If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People. If the currency issued by the People were no good, then the bonds would be no good, either. It is a terrible situation when the Government, to insure the National Wealth, must go in debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold. Interest is the invention of Satan.”
― Thomas A. Edison
+se7ensnakes
Edison's genius was in a narrow sphere of activity and not likely to be a good source of insight on economics. He was uneducated on basic science, even. You can be sure that he knew next to nothing about macro economics - which is a lot different than the business sphere he operated in.
David J Gill Actually that is incorrect. Have you see an Econ 101 class lately. it is full of misinfo. People graduate with degrees in economics and have no idea how money is trully created or how it is affects the economy as a whole. Please refer to Steven Keen to see his uphill struggle to call attention to this problem.
THEREFORE Edison is just the right person to comment because he sees the flaw in the system. In a Fiat currency we dont need bonds. What we truly need is to make banks stop counterfeiting.
4:08 - How will we retain the dollar against private currencies then?
Well as you can see the dollar is a monopoly on currency
Its just a piece of paper with 0 value
One of the best videos I have seen from the LearnLiberty Channel! Clear and Concise
We can do all of these except private currency... there should atleast be a central authority issuing currency notes. Also there should be some regulation to banking but I guess parlament could manage that ...
GREAT VIDEO!
5 minutes to debunk any objection to repealing the Central Bank law (for the 3rd time).
Hong Kong does too have a central bank. Its a de facto central bank called the Hong Kong Monetary Authority. They may have a lot less control than our Federal Reserve, as they're listed as "de facto", but since 1993, there has been something.
"Scotland, Northern Ireland and Hong Kong", and the map highlights..Scotland and the North of England, The Republic of Ireland and Taiwan. Well done!
yes the FED is privately owned, yet its rather peculiar, no one is exactly sure who owns the fed, its leader is appointed by the government, and it was createad by an a congressional act in 1913, thats not how most private institutions are created or run. Pretty fishy if you ask me.
Well said.
rothschilds
Correct. No one really knows who owns it. If we did, we would have someone to point the finger at other than each other. The system is running as designed. The Federal Reserve is the engine that continues to drive inequality for all. We need to stand up as a people and root out the monopolistic control that bankers have taken over our society's money. How in the world did a very, very small group of people come to effectively own the currency that we all use?
Oh, and as proof of the intended misdirection, the Federal Reserve is neither Federal, nor a Reserve. When will the sheep wake up? God, I hope it is soon.
END THE FED.
+Brandon Warscbin
Just because you know how it works doesn't mean it is fishy. Read the wikipedia page.
At 3:56, the gentleman in the video states,"...a self-regulated monetary system is worth considering." How specifically is that an improvement?
That was a great video!
Thank you
I'm still unsure of the role that clearing house associations would play if there is no FED. Can somebody describe it to me?
great video outlining many of the problems with central banking, though its a shame it seems to favour gold as the standard for a nations currency, over a free market in money/currencies that individuals are able to choose from ie: money/currency the people can choose freely.
Very interesting. I'm not yet convinced one way or the other that getting rid of central banks would improve the welfare of the people but I look forward to learning more about this stuff.
End money period
When did they say it was?
Thank you for this. Love the videos you guys make
all the examples of countries you noted have centralized monetary policy they just delegate issuing authority to "private" banks ( with state ownership in a stake)
As a nation we have had our growth stunted and warped by these financial parasites
On what grounds?
Problem with that is that community will create ONE grocery shop, creating a monopoly. There would be no choice, no preference allowed, and majorities would decide everything.
However, when majorities decide things, individuals lose things.
Goog video. Can someone direct me to a counterpoint to this argument? Just wanna learn more.
In this last episode, the housing bubble, the home median networth went from $126 in 2007 to $77 in 2010, causing approximately 40 trillion dollar lost and wiping out 18 years of saving from the average worker.
Under gold standard banks couldn't issues more money than they had in their reserve. Without such a standard why would any bank limit its currency issuance? What mechanism could control such a behaviour?
Actually there would be very little problem since banks would trade currency for substance or credit. We are currently at a high enough level of technology that this would be nearly seamless to implement. Also, with clearing houses there would be standards to bank notes that would help facilitate currency trade. Even today credit institutions accept each other's credits as acceptable trade. Did that help?
This is very informative o.o
Do you know what function the profit motive serves in a complex economy?
What it does it divert resources to where they are most needed and reward people who use those resources well. A co-op working in an economy without the profit motive would be blind to these important signals, and the result would be shortages and surpluses. For an illustration of this coordinating function, look at what happens when governments impose price controls.
"Should We End the Fed?"
Yes!
Fair enough, but I'm opposed to for-profit banking in any form. I think a superior system is what you have with credit unions. Instead of banks working in favor of a third party like stockholders, it makes far more sense to me for banks to work in favor of their customers. Changing that eliminates the basic incentives for banks to behave in a corrupt manner.
I agree, but the fed is a private bank that works nearly independent of the us government. I think we might need to print our money closer to where we make our laws. Whether this entitles a full dismantle/rebuild, or just a bit of restriction, is up in the air.
Yes it is,do YOUR research. Ownership in the Fed has little resemblance from actual ownership. Membership is mandatory by law,the shares cannot be bought sold or traded,nor do they carry a transferable value. Members do not benefit directly and do not control the actions of the Fed,political appointees do. Revenue made through open market operations is returned to the treasury. Fiscal & monetary policy are separated for good reasons. It's more accurate to think of the Fed as a 4th branch of gov.
Thank you sir.
there is only one one provider of construction cement where I live, and its too expensive to ship it in from elsewhere. If banks could force others out then why don't the big construction companies make a deal with the cement manufacturer to only allow them access to the product and shut out all construction competition like that?
Same reason why they wouldn't do that with banks and a clearing house, it is always more profitable to appeal to a larger market than to try and shut off competitors.
What prevents the banks from printing out as much money as possible and distributing it to their shareholders?
Modern co-ops function within larger division of labor economies with price systems and the profit motive. So they can function using the information and coordinating features of that "greedy" system.
And even people participating in a co-op are motivated by profit. They have something they want to gain, and that is lower prices. That is their profit.
I don't think it is possible to go to full reserve banking, there are so many different types of money now, repo, checking accounts, commercial paper, money market funds. And people would just start using longer term debt instead of demand deposits so I don't think ending maturity transformation would help
Google "Central Banks as Sources of Financial Instability" by George Selgin. There were other government sponsored banks before the modern central bank, and government monetary policy interfered in other ways, causing these panics.
And in previous panics before central banking, depositor losses generally equaled less than 1% of GDP. In modern banking crises with central banks, losses have been as much as 20% of GDP.
Eh. I'm just drawing a comparison between now and my early 20's, when I could check out a couple books from the library, and expand my knowledge base immensely. A part of me wishes that I was capable of learning every human language in existence, so I'd have no language barrier to gaining more knowledge. I even attempted this and took German, Latin, French, and Spanish in high school. Sadly, I've forgotten all that except for a little German.
Make all fed buildings a place for economic education.
As I understand, Hong Kong *does* have a central bank. From wiki:
"The Hong Kong Monetary Authority (HKMA, Chinese: 香港金融管理局 or 金管局) is Hong Kong's currency board and central banking authority. It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking". The organisation reports directly to the Financial Secretary.[1]"
perhaps they just mean that hong kong doesn't have a central bank in the sense of a monopoly of certain functions. I think they have a national currency but most commerce is done by private currency. pretty sure I saw that on stossel
Not entirely. Special privileges are granted to corporations by the state, but the corporate firm as a market organization is not a creature of the state per se.
There were a lot of factors involved in the crisis itself. The low interest rates 'caused' the crisis in the sense that if interest rates had been set by the free market (supply and demand) rather than central planning bureaucrats at the Fed, the crisis would never have happened. The situation that led to the crisis could simply, never have occurred.
If we do revert back to commodity currency, why should we not expand it to other precious metals like platinum and palladium? (Other than because it's unconstitutional)
Why is platinum and palladium unconstitutional but not gold or silver?
@@fatfat1877 the constitution says that gold and silver can be the only commodities
We should end the fed and fda
We must united as one to end the fed!
scotland mainly uses the pound sterling, not private bank notes
The Federal Reserve isn't just immoral, it's illegal under under the Constitution; only Congress shall print or coin money and only gold and silver shall be legal tender. You have it backwards.
I wrote this analogy to explain fractional reserve lending:
Fractional Reserve Lending is much like having copyright laws extinguish to an exclusive group of businesses. Note this analogy. If video stores were allowed to make a copy from an original and rent that copy to another Video Rental store, and rent the original to the public. The second video store similarly was allowed to make one copy to rent to a third video store while renting the other to the public. Soon everyone who cared to watch the DVD would have done so, and the video stores would have made a killing renting out cheaply priced copies. The effect is that once a person watches the film that person has fulfilled his/her need, but the DVD did not get expended (like gasoline or food) but would have continue to circulate in the community. But then who looses? The production team who labored to produce the film.
Similarly money circulates in the economy from one person to another having an effect. If you have two conflicting contracts…one that maintains that you can have the money back when it is due, and the other where the money is loaned, then that is plain and simple FRAUD. To clarify this fraudulent claim lets look at what happened during the great depression.
There were rumors of an economic downturn so people decided to exchange their paper money for gold. The funny thing is that the paper money was a receipt for the gold as it read: “This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank”; and “PAY BEARER ON DEMAND”. BUT… When the public lined up to exchange their receipts they found out that the banking system/treasury/government had counterfeited these receipts so that there was a total of $71.8 billion of such receipts but only 3 Billion dollars worth of gold … See Banking and Monetary Statistics (Washington, D.C.: Federal Reserve System, 1943), pp. 544-45, 409, and 346-48.
"From 1836-1913 we had a free banking system in the USA."
Not quite. During that period banking was more free than most other periods. But bankruptcy laws were not consistently applied to banks. Payment in specie was frequently suspended. The National Banking System (post civil war) significantly cartelized banks. Branch banking was severely restricted. Money changers (who limited credit/note inflation) were severely regulated.
the problem is that too big to fail banks have built a dependency on the fed, believing that they'll buy toxic assets in a time of desperation. This only perpetuates a bust in the business cycle and increases inflation.
some propose a free banking system, in which private banks issue their own liabilities and adjust with the market, isntead of relying on the fed to gather all the information and manipulate the fed funds rate, which only causes bubbles
East German D-marks were privatized until reunification in the 1990s at the insistence of France who vetoed reunification until Germany agreed to dismantle the highly popular and low to negative inflation private D-mark. This move was to open German banking to political pressure, foreign and domestic.
The most severe economic downturns and crises in America have occurred since the creation of the Fed, not before it, and it was the actions of the FED itself, that caused and prolonged severe economic downturns, such as the Great Depression. Then, there's the constant "hidden tax" of inflation that continues to erode the dollar's value. The Federal Reserve system is a house of cards, built on the premise of perpetual debt.
It is only possible if we move to a full-reserve banking system. Free banking would not, in itself, solve the problem of monetary instability, it would probably exacerbate it as it did in the past. Imo, if we remove the cause of the problem (fractional reserve lending), all other considerations are secondary. =)
Today, it is not illegal to make your own currency, the problem is getting a wide range of people to accept it. ;)
The U.S. understood this problem come the turn of the 20th century, which is why the Federal Government adopted the unfettered coinage of gold and silver. However this too is inefficient in maintaining an economy as large as the United States. One problem with current large transaction computer stock sales on Wall Street is that if a hacker, for example, says the president is assassinated on twitter - the HUGE computer-led SELL becomes larger, the money supply shrinks, driving up interest rates
Great knowledge!
+BOB S. Thanks! Do you have any topics or concepts you would like to see us cover?
--The Learn Liberty team
Shoppers buy a stake, which the fee to purchase a stake in the co-op is used as a pool of resources from all the "shopper-owners". The problem is that you assume that this is enough to run any co-op off of. It can be if the number of shopper-owners is at critical mass or the fee for a stake is high enough. But relying on this is risky as large unexpected liabilities will consume large amounts of the investment even with insurance. Prices still have to be set on products in order to buy more.
Banks don't simply print x10 the amount of dollars in the vault. The money multiplier is a side-effect of reserve lending. Essentially,money expansion does not happen as an internal transaction, it happens as a results of transaction between banks. It is literally an accounting glitch. Although I despise fractional-reserve lending.
Also, for a bank to receive new "printed" Federal Reserve notes, it must give up a treasury security that pays interest. So the system isn't entirely rigged. ;)
What about Friedman's K rule or target inflation, say below 1%, like NZ which has had very stable monetary policy and economy for decades.
It is the wants of the people that determine bubbles not the federal reserve. You could argue that the federal reserve should have tried to stop the irrational exuberance by hiking interest rates to force people into default, but the Fed itself is not the cause
In your situation, you're talking about a private monopoly. In a free market, competition drives down costs. If a company has all these undesirable traits, a competing company can offer a better deal. It's this competition that is going to drive down costs and attempt to give better service because they want to be better than their competitor. Companies are trying to provide the best service as the best price, and they want higher wages if a competitor can offer a better deal to the employee
My position has been the same all day long. You said "A government agency is also compelled to give greater accountability of it's activities to the public". I said, be careful what you wish for because revealing it all would cause the global economy to explode with little warning. Maybe we are misunderstanding one other. If that's the case I'm okay with leaving it alone.
Look up the court case "Lewis vs. the United States 1982" they dismissed the case because the court determined that the FED is not apart of the government.
I would like to see your next video about how the FED was responsible for the 08 financial crash.
Corporations were formed for the same reasons that a co-op was. A group of people share ownership in a single entity. In a modern local co-op the employees are the primary shareholders, similar to profit sharing that corporations have done for centuries.
At the co-op i shop at, the owner controls 51% of the shares,and then employees that have worked there for over a year,are granted a split share of 49%.
How exactly is this different from a corporation? Indeed,it IS a corporation, an LLC. ;)
Now that's interesting...so instead of ending the FED in favor of putting currency back under Congress, Professor White favors ending the FED and allowing the private sector to regulate itself. I hadn't considered that approach yet.
Thank you for an argument that didn't involve some conspiracy theory B.S. or any such drivel.
Actually, from 1863 to 1913, we had a National Banking system, not a Free Banking system. From 1837 to 1862 we had a Free banking system. In addition, the panic of 1837 was caused by malinvestment as a result of artificial injection of liquidity into the economy, not by the destruction of the central bank. In 1863, there were new branching regulations that were put on banks. What was the result of this? REGULAR banking panics, which you have named, and you supported my point. Thank you.
Yes it does. It all comes down to incentives. Govt has no profit motive which is why govt projects always fail.
The only difference between the fed and the proposed system would be that there would be no monopoly without a central bank. The banking groups would have to compete through sound practices. With the fed, there is no real competition. That's how they get away with robbery. The solution would be to abolish the fed as proposed above, create a gold or silver standard, prevent by act of law the practice of fractional reserve lending, and subject the clearing houses to annual audit.
Demand for dollars is just being forced down, just a lot of excess supply is created with 'quantitative easing', that fuels financial speculation and artificial economic growth. Also coupled with a low base rate (the rate at which banks borrow money from the Fed) far below inflation it riggs the financial system in favour of borrowers, who will have to pay a low interest on their loans, and responsible people will have to get a small return on their savings, further fuelling the bubble.
Correct. However, for a crisis, like the one in 2008, to occur many things have to go wrong at the same time. You take away the Fed's contribution and the crisis doesn't happen.
GOOD VID!
Not enough gold and silver? Perhaps a different base system?
so basically changing a dollar for 4X25c. and let the "market" do it's thing. right.