The Legal Consequences Of The Federal Reserve Act And Monetary Policy In America

The Federal Reserve Act of 1913 was the first step in a long journey that had the

effect to undermine the freedoms and liberties bestowed by our Founding Fathers upon the United States. When the Framers of the United States Constitution created their more perfect union, they well understood the dangers of Central Banking. The Framers of the Constitution had seen how the creation of fiat money not backed by gold or silver would be used by those in power to the disadvantage of the populous. Thomas Jefferson is known for famously quoting:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

The Founding Fathers envisioned that the State should have the exclusive power to issue circulating currency. There was no belief that this power should be conferred to a Central Bank. Article I, Section 8 of the Constitution grants Congress the power To coin Money, although there is no explicit definition as to what money comprises. In 1792, the Coinage Act but nowhere is the word money provided for the coining of copper, in addition to gold and silver, and made those coins lawful tender. Many thoughtful legal scholars comment that Article I, Section 10 to claim the Constitution says money should be gold or silver coin. [No State shall] make any Thing but gold and silver Coin a Tender in Payment of Debts. The Federal Reserve Act of 1913 has inverted the asset based vision of the Founding Fathers to the debt-backed paper fiat scheme that has allowed the banking class to become wealthy at the expense of the American public.

The Federal Reserve Act of 1913 provided the opportunity by the academic class to test the Keynesian theories of John Maynard Keynes. Keynes was a British economist whose ideas have wholly shaped and consumed the entire field of modern macroeconomics. Keynes ideas centered on that the state has the ability to subvert the business cycle to avoid recessions and depressions while allowing for full employment by the state. Prior to the Federal Reserve Act of 1913, the ability of the state to manage the economy had been limited as intended by the Founding Fathers. Nevertheless, the passage of the Legal Tender Laws of the late 19th century and early 20th century coupled with the creation of a Federal bank as per the Federal Reserve Act of 1913 allowed the state the opportunity to manage the business cycle of the United States.

It is important to note that historically there had been 2 prior banks created. The First Bank of the United States was a central bank that had a charter for a term of twenty years. The Second Bank of the United States was chartered in 1816 but lost its charter in 1836 after President Andrew Jackson refused to renew the charter. Andrew Jackson strongly opposed renewal of the charter because he had hostility to banking and a belief that specie (gold or silver) was the only true money. Jackson further believed that banks were the cause of inflation and cronyism and did not benefit the public welfare.

The legal consequences since passage of the Federal Reserve Act of 1913 have been enormous. The academics have championed a modern world of macroeconomics has allowed American fiat paper money un-backed by specie to flow to all corners of the globe. America has enjoyed status as the world reserve currency that has not been backed by gold since President Nixon closed the gold window in 1971. The effect of the Keynesian monetary policy on American debt. has allowed for the ballooning of almost sixteen trillion dollars in obligations that are backed only by the promise of the United States government to pay this obligation. The practical effect of such an obligation is to slow the growth of the United States economy by forcing interest payment obligations that accrue exponentially on the principal of the aforementioned debt obligation. This requires further management by the United Stated government and involvement to shape and steer the American economy to create greater growth. The ultimate effect is that the freedoms and liberties enshrined in the Constitution by our Founding Fathers become diminished over time. In December of 2013, the Federal Reserve Charter will come to an end. The current law requires that in order for the Federal Reserve to retain control over the United States money supply, this charter will have to be resigned by Congress. The American public is slowly learning how dangerous central banks are to a governmental system; it may pose a problem for the privately owned bank to renew their charter.

by: Peter Stein

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