Why You Need To Meet Murray Rothbard

Question #1. Ever heard of fractional banking?Question  #2.Did you know a bank can legally lend up to 10 times more money than it has in deposits?Question  #3. Did you receive a government-sponsored “public” education?(Best guess: If you answered “no” for Questions 1 and 2, you answered “yes” for 3. If you answered “no” to 1, 2 and 3, you probably over-paid for your private education.)

The ignorance of the general public about the negative economic impact of fractional reserve banking is enough to make one seriously consider whether public education isn’t some form of mind-control conspiracy. When what would be considered theft or fraud in any other business transaction is completely ignored simply because it bears the stamp of government approval, you have to wonder if the absence of outrage isn’t due in part to a deliberate campaign to obscure or hide the truth.

Which is why I love Murray Rothbard and his book The Case Against the Fed (Click here to purchase it). In 150 pages, Rothbard takes a subject (banking) that is almost unintelligible to the average American and makes the essential elements crystal clear. And when the scales drop from your eyes, two items stand out:

1. Fractional banking isn’t much different than counterfeiting. The government gives one institution (the central bank) the authority to print paper money – out of thin air – and then requires that it serve as “legal tender” for all financial transactions.

1. Governments cannot help but love fractional banking because it gives them economic power over the citizenry. The first party to obtain the use of counterfeit money is the government, and the government is the only party that benefits from the introduction of it into the economy. After that, all others suffer because the excess paper money creates an imbalance between the cost of goods and services and money that can be used to purchase them. This inflates prices. Real people, working for real money, must now pay more for the same loaf of bread or automobile.

 According to the bio on the back of his book, “Rothbard (1926-1995) was dean of the Austrian School of economics and America’s foremost scholar of central banking.”

America’s foremost scholar of central banking. There’s an obscure distinction. (Who would want to put “scholar of central banking” on their resume? The fact that we would ask that question is indicative of how little we know or understand about how central banking distorts every economic action in the United States.)

But read this brief comment from Rothbard:

“…if the public knew what was going on, if it was able to rip open the curtain covering the inscrutable Wizard of Oz, it would soon discover that the Fed (i.e., the Federal Reserve Bank, the central bank of the United States), far from being the indispensable solution to the problem of inflation, is itself the heart and cause of the problem.”

Got that? The Fed, now led by Ben Bernancke, formerly under the direction of Alan Greenspan, is the cause of inflation. And because the Fed is the cause of inflation – which progressively diminishes the purchasing power of our hard-earned dollars – it can never be the solution.

The irony is that 170 years ago, the citizens of the United States understood the impact of a central bank – and they voted to close it. The first “Fed” was called the First Bank of the United States (catchy title). It was authorized by Congress in 1791 and “retired” 20 years later when Congress declined to renew its authorization. A Second Bank of the United States was chartered in 1816, but 20 years later, its charter was not renewed either. From 1836 to 1913 the United States did not have a central bank.

A major plank of Andrew Jackson’s presidential campaign in 1832 was his opposition to the re-chartering of the Second Bank of the United States. Can you imagine a sound byte today from McCain or Obama or Hillary that promised to “rid us of the scourge of central banking?” (Hmmm…that sort of sounds like Ron Paul, doesn’t it?)

Two final comments:

Every citizen who cares about their financial future should understand fractional reserve banking and the role of the Federal Reserve in the economy. Rothbard’s book is a good place to start, but any education would be helpful.

The opposition to central banking and the economic abuses that result is not new. As far back as Biblical times, Solomon warned that “dishonest scales are an abomination to the Lord, but a just weight is His delight.” (Prov. 11:1). Government-authorized counterfeiting might be legal, but it is dishonest – every new piece of paper distorts the value of our work and our assets.