why do some like ron paul want to abolish the federal reserve?

Question

So I heard Ron Paul say that he wants to abolish the federal reserve. I hear this mostly as a quick soundbite. I never hear any real explanation of this. Is this a good idea or a bad idea? Do any other politicians support this? I would think hardly any economists would support this. Am I wrong?

Answer 1

The two previous posters are confusing why Ron Paul wants to abolish the Fed. It's not because of the way they manipulate the economy, etc., it's because the Fed is unconstitutional. There is no provision within the constitution for a central bank. Article 1, Section 8 of the U.S. Constitution says that "Congress" shall coin our money, not a central bank. The founding fathers knew that consolidating the control of money to a central power could be used to oppress the population.

Thomas Jefferson so rightly quoted, "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 fed was created in 1913. Do you realize that the price of a loaf of bread in 1796 was about the same as it was in 1912? Over a hundred years and prices barely moved. Prior to 1913, inflation was basically Zero. It wasn't until after the creation of the Fed that inflation manifested itself. Governments have a nasty tendency to spend more then they take in in revenues. But, instead of cutting back on spending, they have 2 choices; 1) raises taxes (which would get them all kicked out of office) or 2) print the money to fuel their spending, which is inflationary.

I disagree with Paul going back to a gold standard. Yes, under normal circumstances an asset backed currency is ideal as it would prevent arbitrary money printing, but there isn't enough gold (or any other asset) that would be needed in enough quanitity to foster commerce and economic growth. What I do believe is that it's okay to have a fiat currency, but with very strict controls on adding to the money supply. During the colonials days, the colonial gov't issued currency called "Colonial Scrip". The money was pure fiat (not backed by anything), but the colonial gov't was very strict in creating it. It only created enough to foster trade and commerce and it only added to the supply to compensate for population growth and guess what? The colonies boomed economically.

Answer 2

Milton Friedman believed that monetary policy is so complex that the FED is wrong as often as it is right, so the decision making could just as well be made by a simple rule of 3% money growth a year. Many economist would probably agree if they could figure out how to measure the "money " in the economy so they would know what to increase
Ron Paul thinks he knows what money is and wants to control the money supply by returning to the gold standard, which would require currency to be backed by gold. If he is right , it would cause inflation/deflation to vary with the rate of increase of gold compared to gdp growth, which would add another source of randomness in the economy. But most economist think "money" is credit and currency plays only a small role in the economy. What fraction or the "money" you spend do you pay in cash vs checks, atm. or credit cards?

Answer 3

first of all, Ron Paul--besides being a racist-has no skills as an economist--he's a doctor. That being reported, no. getting rid of the Federal Reserve might precipitate a financial cave in interior the U. S. that could make the excellent melancholy look like a tea occasion. As to why--I recommend you're taking a user-friendly course in economics. that could placed you one up on Ron Paul so a techniques as awareness economics. whether--to enhance one element--Ron Paul's plan is to not do away with "financial fee"--yet to do away with the oversight organisation that ensures tha excursion financial device purposes the way it is going to. between the end results of his plan may be to allow banks and different financial institutions function with out regulation or oversight--taking off the door to bankers appealing interior the csame style of fraud you observed with Enron. no person's money may be secure--you need to circulate right down to the financial corporation any time and locate all your money long gone. it quite is the type of factor he's proposing. you will possibly be able to declare "that doesn't ensue." It befell with Enron--and backin the nineteenth century it befell to human beings many, many situations--this is between the main reasons the Federal Resere grew to become into created. in basic terms awaken one morning and you're bankrupt.

Answer 4

http://www.house.gov/paul/congrec/congrec2003/cr090503.htm

I'm not a big Ron Paul fan, but I do agree the Federal reserve should be abolished.

The use of fiscal and monetary policy to achieve "low unemployment with price stability" is detrimental to free markets, Federalism, and Independence!