How to Cure America’s Ailing Monetary System

How to Cure America’s Ailing Monetary System

Some organizations–including this one–have devoted tremendous amounts of time and energy to exposing corruption within our nation’s monetary system, demonstrating how that corruption adversely affects the financial health of average Americans. While we believe that it’s important to try to wake up the American public by screaming from the rooftops about our country’s monetary problems, we believe that it’s equally important to communicate to the common man what a cure for our monetary ills would look like:

Neutering the Federal Reserve

The Federal Reserve is, of course, the ultimate promoter of unsustainable asset bubbles and Big Banks’ improprieties. Without the Fed’s guaranteed torrent of cheap liquidity and gentleman’s agreement that it will bail out the so-called “Too Big to Fail” banks regardless of the cost or degree of recklessness that got them into financial dire straits, the financial services industry wouldn’t be able to run amok and put the economy in peril as it has been over the past couple of decades.

So, then, neutering the Fed is integral to healing our nation’s infirmed monetary system. And, contrary to popular pessimistic belief, sterilizing The Beast is a realistic endeavor: 74% of Americans want the Fed audited; that number will absolutely grow the next time the economy implodes. Today, two likely 2016 presidential contenders, Republican Rand Paul and Democrat Elizabeth Warren (the latter a possible VP selection for a Democrat ticket), support the Audit the Fed Bill.

Eventually–perhaps in the not-too-distant future–public pressure to audit the Fed will reach critical mass, the Fed will be audited, and the malfeasance that the audit will inevitably reveal will make the public demand that heads roll. Eventually, the Fed will be neutered, the financial services industry will lose its ultimate enabler, and the Too Big To Fails will lose their gentleman’s agreement that the Fed will bail them out no matter what.

Reimplementing the Gold Standard

Naturally, reimplementing the Gold Standard (or tying the Dollar to any scarce, redeemable physical asset) would be an effective means of neutering the Fed. Hard currency would severely limit the Fed’s ability to print, torrents of cheap liquidity would become a thing of the past, and malinvestment would be curtailed in tandem with the reduced flow of cheap money. As a result, economy-crashing asset bubbles would be far more difficult to inflate, and the economy would enjoy something it hasn’t since the mid-1990s: stability. A return of the Gold Standard would exterminate the pestilence that is the Fed’s bubble/burst economic paradigm.

Unfortunately, reimplementing the Gold Standard is a harder sell than is auditing the Fed. Keynesian economists such as Paul Krugman and Joseph Stiglitz have done an excellent job of scaring the public into believing that deflation is the ultimate economic bugaboo and a return of hard currency would necessarily bring about a deflationary depression. This is malarkey, of course: Decades of Fed monetarists’ promotion of INflation have delivered us to the jobs depression we’ve been experiencing this millennium. On a level playing field, Krugman and Stiglitz could be easily vanquished intellectually. Perhaps, with the rise of independent media through the Internet, the Keynesians standing in the way of an honest analysis of a return of the Gold Standard could finally be cast aside.

Growing the Money Supply and Levying Interest Rates via an Algorithm

Reimplementing the Gold Standard might prove challenging, but replacing neutered central planners with an algorithm might not. Milton Friedman once said that, while he disagreed with the existence of the Fed, he believed that the Powers That Be would never allow its abolition. Therefore, Friedman posited, people who disagree with the Fed’s existence should campaign not for shuttering our central bank, but rather for limiting its power. (This is what precisely what Solidus.Center does.) The famed economist believed that the Fed’s power to print and pump could realistically be replaced with a formula that would increase the money supply and levy interest rates according to a number of variables. (Similar to how Bitcoin operates.)

Like a return to the Gold Standard, this change in procedure would reduce the Fed’s torrents of liquidity, curtail malinvestment, and hinder the inflation of asset bubbles. And, unlike a return to the Gold Standard, the implementation of an algorithm could be realistically sold to the public, especially in the wake of another financial crisis and/or an audit of the Fed.

Reestablishing Glass-Steagall Legislation

Reestablishing Glass-Steagall Legislation, a law passed in the wake of the Great Depression that prevented banks from throwing depositors’ funds into the Wall Street casino, would be a fairly easy sell in the wake of another economic collapse. While recent attempts to reimplement Glass-Steagall have not bared fruit, there is a growing politically-leverageable negative public opinion of Big Banks that transcends ideology and political affiliation. The term “bankster”, for example, has become a household word, and several high-profile elected officials currently support a return of Glass-Steagall in addition to the Audit the Fed Bill. (Including the aforementioned Rand Paul and Elizabeth Warren.)

Like returning to the gold standard, reestablishing Glass-Steagall Legislation hinges on public pressure reaching critical mass. But G-S would also have the benefit of inertia: If the Fed were audited and Big Banks’ crony relationships with the Fed were exposed, passing Glass-Steagall would become politically expedient.

A great many pessimists believe that reforming America’s monetary system is a pipe dream. But tying the hands of our supercilious central bankers and reckless Big Bankers is not only possible, but it’s a distinct possibility in the wake of another crash.

Seth Mason, Charleston SC

This post was written by

Seth Mason is the owner of Lowcountry Vistas Charleston, LLC (www.LowcountryVistas.com), a landscape design and installation business serving the greater Charleston, SC area, and the owner of Charleston Spanish Tutor (www.CharlestonSpanishTutor.com), a Charleston-based tutoring service. Between founding Solidus.Center and earning his M.B.A. during the 2008 Financial Crisis, Seth operated a boutique Hispanic marketing consultancy called Publicaciones el Nuevo Sur, LLC, earned his horticulture chops as a part-time landscaper, published a pro-economic and individual liberty economics and politics blog called ECOMINOES (www.Ecominoes.com), and hosted a pro-economic and individual liberty economics and politics talk radio show called ECOMINOES Radio. Prior to earning his M.B.A. during the 2008 Financial Crisis, he was the Owner, President, and Editor-in-Chief of Vida Latina Spanish-language newspaper, which he grew from a Charleston, SC-based community paper into a regional Hispanic entertainment and current events periodical distributed in 8 metropolitan markets throughout South Carolina and Georgia.

Comments are closed.