Zion, IL
by A.B. Dada
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Almost all of my friends and family in blood and in faith are either confused about, or just ignorant towards, the Federal Reserve system. For faithful and non-faithful alike, I believe the discourse on the Federal Reserve is the most important conversation regarding the future of the United States, even more important than the War issues, the separation of Church and State, and taxes.

As a Christian and an antinomianist, it is important for me to look at what Christ taught — but not necessarily what others provided for. His teachings and actions are the most important aspects as we are supposed to be like Him, even if others who tried failed to grasp His meanings. Christ said that loving God is the greatest of His commandments, and loving others should follow after. God’s Ten Commandments to the Jews all came from these things that Christ now taught His early believers — things that we should adhere to today. If you love someone, you won’t kill them. If you love someone, you won’t steal from them. If you love someone, you won’t defraud or lie to them. Love is the basis for all that God wants of us, and wants for us. Even if you are an unbeliever, the desire for love and to love still likely is a big part of your life.

For me, the biggest reason why I am against the State and for individual freedoms (to do good or do evil) is because of what the State stands for: performing jobs that individuals themselves can’t do or won’t do. When the People elect a central body to provide for society, they are basically making a vote that says “I can’t do this, or I refuse to do this, so I want to elect someone else to do it for me.” For a Christian, I truly believe that this is a cop-out from what God has enabled everyone to do: use your hands, your mind and your mouth to love others in every way. For a non-believer, I think that there is still truth in giving others more love than you might get: being a great example to others is a good way to make the world change, even if slowly.

While I feel that murder (to me) is the worst evil one person can do to another, it isn’t Biblically solid that any evils are worse than one another. For this, we can say that stealing is just as evil in God’s eyes as murdering — and even the thought of stealing is evil. We should refrain from doing either.

Yet when we vote for another party or person to murder others, they do it with our acceptance. Your vote is a vote that says “I am enabling you to perform certain duties, and with my vote you have my full approval to do that.” This is an important fact, because this also happens in private contracts. The difference between a private contract and a vote is that you can always exit a contract with another party — you can’t unvote until the next election. If you vote and someone uses the power of office to kill another, it was your vote who put them there. If you vote and someone steals from others using the power of office, it was your vote who put them there. You must accept and acknowledge the repercussions of what you did to put your responsibility on the shoulders of another, who may not do what you wanted them to stick to doing.

This leads to why the Federal Reserve is wrong — especially for Christians. The Federal Reserve is a quasi-government organization composed of mostly bankers and economists. Their sole purpose is to set the interest rate that banks charge for loans to individuals and businesses. Without the Federal Reserve, interest rates would float based on the bank’s desire for funds (savings) and the desire to loan funds to others (loans). I believe a free floating interest rate makes more sense, which I will discuss at another time.

Most people believe that the Federal Reserve just picks an interest rate, and that is law to bind the banks to stick to. This is untrue. The interest rate than the Federal Reserve sets is merely a minimum that banks would charge for a loan — this is because the banks can borrow money temporarily from the Federal Reserve at that exact interest rate. If the Federal Reserve sets an interest rate target of 5%, banks can borrow overnight money at 5% to loan out to others, so it would be unlikely that they would charge less than that.

If a bank has “too much” money in their accounts, they will likely lower interest rates close to 5% to give incentive to others to borrow against them, so that they profit. If a bank has “too little” money in their accounts, they will raise interest rates beyond the 5% to lower incentive for others to borrow from them. This is a free floating interest rate, but it is the Federal Reserve target that sets a minimum and confuses the market.

Here’s the problem with the previous paragraph: banks can almost always get more money than previously existed, because of the Federal Reserve’s other power: to “inject liquidity” into the money market. If banks come up short on money in their accounts or on their books, their interest rates will rise. Because the Federal Reserve wants banks to stick to their target percentage, the Federal Reserve has the power to add more money to the bank’s accounts, allowing them to now loan it out at a lower rate closer to the target rate. This sounds like a good idea since it keeps banks at an interest rate that the Federal Reserve considers fair to the economy, but that is merely a trick of politicians. It is one of the worst things the State can do, and it should be vocally denied by citizens as a theft crime.

When the Federal Reserve “injects” new money, basically giving banks new money that didn’t previously exist, the new money goes into the economy in the form of loans. These loans introduce this new money into various markets (housing, stock, retail, etc). When money (new or old) floods into a market, it causes prices to rise. Let us say that there is a set amount of money in the world that doesn’t change. If all of a sudden people were interested in MP3 players but not in radios, they may take their money and spend it on MP3 players, no longer buying radios. The money from the “radio market” floods into the “MP3 market.” Since there is a set limit (supply) of MP3 players, people quickly bid up the price of the remaining MP3 players, which causes the price to go up. Radios now have prices that go down, because of the limited demand and high available supply. In a free market, this is a good process — the fall in prices causes manufacturers to want to produce less or stop production entirely to meet demand. The rise in prices causes manufacturers to build more, or entices other manufacturers to compete by making that product. Price rises happen because money shifted from one market to another.

But what if the money supply in the world wasn’t fixed? What if someone could counterfeit huge sums of new money, and no one knew new money was flooding into the market? In this case, that new money would go somewhere — to some market. Because the new money would fight for the same products as the old money, prices would rise, but we may not see prices fall anywhere else, since the old money is still chasing the same number of goods. This causes manufacturers to possibly make too many new products, or ignore a market that should be antiquated. Even worse, the new price rises happen much faster, so your money is worth less and less as the new money floods into the economy.

This is theft, plain and simple. The people who profit from the new money are the banks that loan it out — and by the time the new money hits the market, your money is already worth less and less. Instead of someone taking money out of your wallet directly (theft), the Federal Reserve causes the money in your pocket to be worth less than the day before. This is still theft, and it is still wrong to support theft!

Politicians of all parties seem to want the Federal Reserve to exist, because few if any actually call out against it as an act of theft and an act of market destruction. When the dotcom bubble grew and blew up, it all happened because of the Federal Reserve creating way too much new money. Yet few politicians if any commented on the Federal Reserve’s collusion with large banks to destroy the wealth of the middle class and poor.

When gas prices rise, it is a combination of decreased supply and a huge increase in money created. Gas prices rise more due to monetary inflation lately. The housing market went bonkers in price because the Federal Reserve went bonkers in creating new money — and the profits from those who got out early in the dotcom market also flooded the housing market: two decades of monetary inflation caused bubbles that affected millions of poor and middle class, who made malinvestments because they thought they were wealthier than before.

But they weren’t. Even with more dollars coming in the form of your paycheck, prices are much higher, so you may actually be poorer today than years ago. Easy credit does not equal wealth.

We must be aware of the Federal Reserve and see that supporting this unconstitutional and thieving quasi-State organization must come to an end. I believe you should not vote for someone who will not commit to closing down the Federal Reserve — it should be a main focus of the upcoming Presidential, Congressional and Senatorial campaigns in 2008.

Related posts:

1. Ron Paul on ending the Federal Reserve
2. How to fix the Federal Reserve, fiat money, and fractional reserve banking
3. Government market control without the Federal Reserve
4. Federal Reserve M0 and H3 Explosion
5. Full Reserve Banking: What is a reserve?
6. How to get money, if you’re a bank
7. Credit Cards and Full Reserve Banking
8. Negative Interest Rate
9. Bailing out the Banks: Print Money versus De-hoarding
10. Full Reserve Banking and Home Mortgages