DownsizeDC.org
January 15, 2009
Abolish the Federal Reserve
By Jim Babka

Quote of the Day: "We got into this crisis because power was overly concentrated relative to knowledge. What has been going on for the past several months is more consolidation of power. This is bound to make things worse. Just as Nixon's bureaucrats did not have the knowledge to go along with the power they took when they instituted wage and price controls, the Fed and the Treasury cannot possibly have knowledge that is proportional to the power they currently exercise in financial markets." -- Arnold Kling

Subject: End the FED

The stock market rises and then crashes. Housing prices soar and then plummet. The Federal Reserve causes these booms and busts by constantly expanding and contracting the supply of money and credit. 

Credit expansion by the Federal Reserve increases the demand for producer assets and investment instruments. This causes bubbles in things like stocks and housing. When the Fed then contracts credit to avoid systemic price inflation the asset bubbles burst.

This is the history of the Federal Reserve -- booms and busts, mixed with episodes of economic stagnation and high inflation like the 1970s.

Even before the Fed was created in 1913 government manipulation of money and credit caused repeated bubbles and contractions. One big source of this mischief was government imposed exchange ratios between gold, silver, and the U.S. dollar. When these hardwired exchange ratios didn't match reality, problems ensued.

It's important to recognize that economic perfection isn't possible. Investors will always make mistakes. But we would expect these mistakes to be randomly distributed throughout the economy, and occur at different times. What causes a bunch of investment mistakes to cluster in particular sectors at a specific time, causing systemic problems?

Only government has the power to impose universal conditions on the economy, from the top down, causing investment mistakes to cluster, like they have in the housing market. The government can do this by passing laws and creating programs that favor one type of investment over others, causing a boom in those sectors.

But the Federal Reserve, with its monopoly control over the supply of money and credit, is an even more powerful mechanism for causing investment errors to cluster.

We need to get off the Federal Reserve roller coaster. We need to end centralized top-down control of the money supply and interest rates. We need a true free market in money and banking. We must abolish the Federal Reserve.

Congressman Ron Paul has a bill to accomplish this. It's called the "Federal Reserve Board Abolition Act," and a national coalition called "End the Fed" is working to bring attention to this bill.

Please use our quick and easy Educate the Powerful System to ask your elected representatives to co-sponsor the "Federal Reserve Abolition Act" when Congressman Paul re-introduces it in this Congress. 

Please ALSO forward this message to others and Digg it on our blog. Our record thus far this year is, 43 Diggs. Please help us top that today!

Thank you for being a part of the growing Downsize DC Army.

Perry Willis
Communications Director
DownsizeDC.org, Inc.

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