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Critique Essay: Out of Thin Air and Straight Into Pocketbooks

To many Americans, the Federal Reserve is another government agency designed to help the American people achieve the American Dream. We hear the interest rate is being raised, and we are upset, though none of us have any idea what that actually means. We hear the interest rate is to be lowered, and we are glad, though we still have no idea how that helps us. The Federal Reserve is an unique organization that lends money to its own branch banks of the Federal Reserve and the Government of the United States. Its stated goal in the Federal Reserve Act of 1913 is to strengthen the economy through manipulation of short-term interest rates so America has maximum employment, stable prices, and reasonable long-term interest rates. The Federal Reserve is controlled by private individuals whose desire is to place themselves in power over the American people by the printing of Federal Reserve Notes and by keeping the ownership of the United State's debt. This system does not benefit the American people and is in fact detrimental for the future.

American history shows an off-and-on establishment of national banks. Alexander Hamilton was the first to establish such an enterprise, much to Thomas Jefferson's chagrin, who later allowed the charter to lapse in 1811. The Second Bank of the United States was chartered in 1816, but would not be renewed by President Andrew Jackson in 1836. The next centralized banking structure in the United States is and, continues to be, The Federal Reserve as established by the Federal Reserve Act of 1913 and subsequent amendments.

The Federal Reserve Act was passed on December 24, 1913, right before Congress' winter break. Most Congressmen were already gone from Washington D.C. Woodrow Wilson, whose campaign was helped substantially by internationally known bankers, signed the Act on the same night. It is plausible to suggest that this group of bankers pushed the Federal Reserve Act through Congress so as to gain control of the dollar. By doing so, the elite families of the world are able to control the United States' economy and enhance their fortunes.

The constitutionality of the Federal Reserve Act has been disputed for many years. Many hold that the Federal Reserve cannot print money because that is a power delegated only to Congress in the Constitution. Article I, Section 8 of the Constitution states, “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” However, the Supreme Court Case of McCulloch v. Maryland gives different evidence for the subject. McCulloch v. Maryland verifies Congress' power to incorporate a central bank, in the form of the Second Bank of the United States. a freelance website supported by the National Endowment for the Humanities, informs that this case also prevents states from taxing the Second Bank of the United States The implications of this case, as related the Federal Reserve, are that if the Federal Reserve is defined as a central bank, it is legal under the Constitution and states cannot tax, and possibly, the national government could not tax any bank that is a part of the Federal Reserve System.

According to one of the leading sources of unbiased, simple explanations, The Federal Reserve is structured to remain “independent” within the US government. Twelve Federal Reserve Banks are the basis of the system. The fifty states are divided into twelve Federal Reserve Regions, each one is overseen by a Federal Reserve Bank. The presidentially appointed Board of Governors then oversees these Federal Reserve Banks. The Board of Governors is to represent the interests of the government while the Directors of the Federal Reserve Banks are to represent the private sector of America (. com).

Auditing of the Federal Reserve has switched between different departments and agencies. The U.S. Treasury, Government Accounting Office, and various private firms have all audited the Federal Reserve since 1913. As of 1999, the Government Accounting Office is the main auditor of the Reserve, but it does not have access to all of the transactions of the Reserve. “Transactions for or with a foreign central bank, government of a foreign nation, or non private international financing organizations” are not audited. “Deliberations, decisions, or actions on monetary policy matters, reserves of member banks, and open market operations” are not audited. Transactions that were conducted “under the direction of the Federal Open Market Committee” are not audited In plain English, any transactions with foreign entities are off limits as is the private information of member banks of the Federal Reserve System.

In Section 2A of the Federal Reserve Act, as posted on the official Federal Reserve website, it is stated, “The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates ().” In plain English, the Federal Reserve is supposed to maintain growth of the economy so America has maximum employment, stable prices, and reasonable long-term interest rates. These goals are not only good for the American people, they are also beneficial for any investor, foreign or domestic, who invests in the United States' economy.

The Federal Reserve has done a good job of regulating the American Economy. Since 1987, inflation has decreased and “the economy has seen its longest peacetime expansion in U.S. history Alan Greenspan, along with the Federal Open Market Committee, has carefully watched and monitored the stock market in order to accurately change the short term interest rates to reflect the economy. Unemployment numbers are normal for the United States economy, and have only fluctuated slightly in the past few years. And while the economy is never an exact science, the Federal Reserve's Board of Governors has effectively dealt with long term economic stagnation and recession by actively manipulating the short term interest rates.

However, it must be recognized that the Federal Reserve Banks are private, not government, institutions. These private banks generate their own income and are owned by private stockholders. The Lawful Path, a freelance American run information website, states that the controlling shares the most important Federal Reserve Bank, the Federal Reserve Bank of New York, are owned by the Rothschild, of the Bank of London, through the subsidiaries of J.P. Morgan Co. and Kuhn, Loeb & Co. The Federal Reserve Banks are owned by private investors, foreign and domestic, and it is the monopolizing of stock ownership that should worry the American people. What is to prevent them from exerting their influence through the Banks and into the Board of Governors? The United States' government has no control over the Directors of the banks or the Board of Governors. At this level of government, influence is all any politician, banker, or businessman has.

When more money is needed in the American economy, the American government asks the Federal Reserve to print more Federal Reserve Notes. As reported by William Blase, in a paper for a university course at New Mexico State University, “According to Devvy Kidd's, "Why A Bankrupt America?" The Federal Reserve pays the Bureau of Engraving & Printing approximately $23 for each 1,000 notes printed...They then secure a pledge of collateral equal to the face value from the U.S. government. The collateral is our land, labor, and assets...By authorizing the Fed to regulate and create money (and thus inflation), Congress gave private banks power to create profits at will printing of more money without a standard behind the paper bill causes inflation in small or large amounts. After Wold War I, Germany printed too many German Marks causing unnaturally high inflation which plunged the country into a severe depression, which contributed to World War II. The Federal Reserve has done an excellent job of keeping inflation low enough to fool the American people, meaning prices have gone up for basic items, but this has happened at a slow rate. The Federal Reserve still prints money out of thin air. The backing behind any denomination of Federal Reserve Notes is “United States Credit This is also seen in Article 1 Section 8 of our Constitution, which states that Congress may, “borrow money on the credit of the United States.” A dollar bill is only worth a dollar because we think it is. The United States Government is then required to pay back the face value of the bill and interest on the face value, regardless of the printing price. It is this requirement to pay the Federal Reserve “back” that creates the national debt.

Thomas Jefferson wrote: “The Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution...if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.” We has given ourselves a privately-owned Central Bank. And while the Federal Reserve does help to regulate the economy, there will be a heavy price to pay in the future because we cannot manage the national debt now.

One solution is the repealing of the Federal Reserve Act, and returning the debt to the United States Treasury Department. According to World News Stand, a freelance website devoted to informing the American people, the United States can buy back the Federal Reserve for the orginal investment of 450 million dollars Then the budget could be balances and income taxes would actually pay down the debt rather than paying off the interest of the national debt.

Another option is to move back to the gold and silver backed currency. While it would be easier to repeal the Federal Reserve Act and then institute this kind of system, competing currencies are available for use in the United States of America right now. The Liberty Dollar is one such currency, completely backed by gold and silver Any competing currency also honors America's long tradition of competition in the economy. The Federal Reserve should have competition on its monopoly on issuing currency.

The American heritage of freedom from tyranny was the reason we fought the Revolutionary War. Today however we are tyrannized in a different fashion: through the debt of the American Government. As long as there is no solution to rid us of this debt, there is no way to move forward. The Federal Reserve has monopolized the issuance of currency and has created an endless cycle of increasing national debt for the United States of America. Repealing the Federal Reserve Act, moving back to a gold and silver standard for American currency, and buying back the national debt will be a step in the right direction for the American People. Perhaps we can leave the next generation with a more stable economy than what was left to us.