DownsizeDCFoundation.org
July 23, 2008
The Myth of the Lender of Last Resort
By Perry Willis

Many who oppose the inflationary actions of the Federal Reserve nevertheless favor it as a "lender of last resort." Of course, by definition, there would always be a lender of last resort even if there were no Federal Reserve. Just as any item you've misplaced is always found in the last place you look, the lender of last resort is simply the last entity willing to provide a loan, so clearly something else is meant by the term "lender of last resort." What it means is this . . .

The Fed is always willing to loan funds to banks that have made bad decisions, even when no one else will. But is this really a good thing? Just imagine how poorly many people would perform if there was an "employer of last resort" to provide everyone a job and a paycheck, regardless of their work habits. America would be a lazy, sloppy, impoverished place. But this is the role the Fed plays in the banking system. Thus, the Fed is the guarantor and encourager of bad banking practices.

But even this meaning of "lender of last resort" is misleading. It implies that the Fed lends bad banks its own money. This may be true to some extent, as the Fed does earn some profits. But it is also true that the Fed can create new money. Whenever it does this the cost is transferred to you in the form of higher prices and devalued savings. Doesn't this make YOU the lender of last resort, and not the Fed?

Filed under
Blog commenting is currently under construction. In the meantime, you can send an email if there's something you'd like to tell us.

What Can We Do For You?

We can help you downsize the federal government, if you want that. All you have to do is join. It's free! In return...

We'll give you an army.

We're recruiting a huge army of supporters to work for what you want.

We'll give you influence.

The Downsize DC Army will exert relentless, resistance-numbing pressure on Congress.

We'll make your voice heard.

We'll use our growing army to make your beliefs heard by everyone, everywhere, every day.

We'll give you winning strategies.

Ideas like our "Read the Bills Act" and the "One Subject at a Time Act" will give you the leverage to win the public debate, control Congress, and Downsize DC!

We'll give you powerful tools.

  • Your free membership includes a subscription to our free email newsletter, the Consent Chronicle, which national talk show host Jerry Hughes calls by far the best newsletter he receives.
  • You'll be able to use our Educate the Powerful SystemSM to pressure Congress. It's easy. All it takes is a few mouse clicks and keyboard strokes. You can do it in your bathrobe while you're drinking your morning coffee, or during a break at work.
  • You'll also gain access to our 16-page strategy document, "The Downsize DC Vision." You'll learn about important insights like "ignoring an axiom," and powerful strategies like "picking off the herd." One reader called this document "the unified field theory" of political change.

To gain these benefits, just enter your email address in the box below and hit Subscribe!

Subscribe to the Consent Chronicle
Enter your email address twice: