The Federal Reserve just turned 100 Years Old as of the 23rd of December (Happy Birthday, horrible institution that plagues every American!), so it would seem the time is right to explore the FED’s origins, via our wonderful friend, Murray Rothbard.
Excerpts are from the 1999 Quarterly Journal of Austrian Economics, Vol. 2, No. 3.
Rothbard puts the initial creation of the Fed on the shoulders of big business cartels who saw a way to leverage the enthusiasm of the emerging “intellectual elite” to reform business for the sake of bettering mankind into a profitable way for them to control industry and crush competition.
It then became clear to these big-business interests that the only way to establish a cartelized economy, an economy that would ensure their continued economic dominance and high profits, would be to use the powers of government to establish and maintain cartels by coercion, in other words, to transform the economy from roughly laissez-faire to centralized, coordinated statism. But how could the American people, steeped in a long tradition of fierce opposition to government-imposed monopoly, go along with this program? How could the public’s consent to the New Order be engineered?
Fortunately for the cartelists, a solution to this vexing problem lay at hand. Monopoly could be put over in the name of opposition to monopoly! In that way, using the rhetoric beloved by Americans, the form of the political economy could be maintained, while the content could be totally reversed.
In that way, the regulatory commissions could subsidize, restrict, and cartelize in the name of “opposing monopoly,” as well as promoting the general welfare and national security. Once again, it was railroad monopoly that paved the way.
For this intellectual shell game, the cartelists needed the support of the nation’s intellectuals, the class of professional opinion molders in society. The Morgans needed a smokescreen of ideology, setting forth the rationale and the apologetics for the New Order. Again, fortunately for them, the intellectuals were ready and eager for the new alliance.
Rothbard gave an entire speech on this subject at the Mises Institute in 1984, the video of which is below. It’s about an hour in length, but Murry is always entertaining, and lord knows no one actually likes to work on a Monday – especially a Monday during the first full work week of the New Year. Give it a watch. UPDATE: if the video below doesn’t work for you, it’s also on youtube.com
If you missed any of our past editions of Mondays With Murray, you can check them out at the full archive.