Why do libertarians always want to abolish the FEDERAL RESERVE

What is the federal reserve? I’m not the smartest person in the world, nor am an economics expert. Why is it so important? I did learn some stuff about monetary policy in high school, but didn’t understand a lot of it. I actually like libertarians, usually they are very chill people, but don’t understand a lot of their philosophy.

Since this is framed as a political question, let’s move it to Great Debates.

General Questions Moderator

The Federal Reserve is the US central banking system. The board is appointed by the president but otherwise it’s an independent, unelected agency that sets its own policy. The Fed controls the US money supply and sets the interest rates that banks use to access said money, which has wide ranging effects on the economy and therefore pretty much every American. However, as normal citizens there’s essentially nothing we can do if we don’t like what the Fed is doing. This should probably be disconcerting to all Americans, but it’s especially so to Libertarians who don’t like the idea of not having any control over their own lives. However, the alternatives to an independent central bank haven’t always worked out very well in the past, so a lot of their objections tend to fall along ideological lines as opposed to practical considerations.

I think the general libertarian view on the Federal Reserve is shaped by two streams of thought.

First, some libertarians have an earnestly held view that the Fed is bad policy.

Second, libertarians as a group include an awful lot of cranks who embrace all sorts of conspiracies and other bullshit about many things, from the moon landing didn’t happen, to vaccines cause autism, to racist international banking conspiracies.

It’s also the monopoly aspect of Central Banking that libertarians take issue with.

The Federal Reserve has a government-protected monopoly on issuing currency.

That explains why so many libertarians have jumped onto the cryptocurrency train.

I think the idea is that banks, like any other business, should compete in the market. The Fed is the worst kind of crony capitalism: It’s a private business that has a government-enforced monopoly and lots of special privileges.

It probably would be, except the Fed has worked way better than the pre-Fed system. Not saying that it’s the best system, or that it’s philosophically sound, but people tend to worry about actual current problems more than hypothetical philosophical ones.

There is generally a large overlap between people who are hostile to the federal reserve and gold standard advocates. I am not one of those people, but have talked with them enough to gather that the main complaint is that the federal reserve generally tries to keep the money supply at a point where there is a small amount of annual inflation. Libertarians don’t like inflation, because it means that cash holdings lose value over time, which they see as a subtle form of taxation. They prefer the gold standard, which often leads to deflationary currency. That basically gives people who hold on to a pile of gold free money over time, which is very appealing to them. I definitely don’t want to turn this into the 58th thread debating the gold standard so I will not delve into whether any of this is good or bad.

And this is the problem with Libertarianism in a nutshell. I’m someone who’s very sympathetic to the ideology, but as you say, while I agree with the hypothetical issues, “abolishing the Fed” seems like a terrible, terrible idea. It’s hard to take Libertarians seriously when they espouse blowing up things that actually work reasonably well.

Of course, in Libertarian circles I’m sure there’s plenty of “evidence” that the Fed isn’t working reasonably well, but then you get into the conspiracy theories that **Ravenman **mentioned

The Fed doesn’t have to be abolished outright. Ron Paul, the most libertarian political figure in modern U.S. history, proposed that we end the Fed by repealing legal tender laws, allowing hard money to compete with government paper.

And just who issues this hard money?

I don’t think it is a conspiracy theory to suggest the Fed was completely blindsided by the last crisis. What is your standard to claim the Fed works “reasonably well”?Seems like that is pretty wishy-washy.

Anybody could. Currency could be traded in the marketplace like anything else.

That would be settled by the market. That’s like a Soviet citizen asking about who would issue the shoes in a capitalist system.

The Federal Reserve is a government agency.

People get confused about this because the 12 regional Fed banks were privately chartered when they were originally created. Technically, those charters still exist. But in the 1930s, Congress centralized the ultimate decision-making of the system under the government agency in DC. Even if someone wanted to argue that the various regional banks are still “private”, based on their original charters which have since been neutered, they are not private businesses in any typical sense. Most notably, their “shares” can’t be sold, traded, or used as collateral, and dividends paid is not according to the shareholders or regional boards but rather according to act of Congress.

They act as Congress and the Board of Governors tells them to act. And in fact, Congress recently decided to reduce the dividend paid on those shares to the larger banks in the country.

Well I’m not sure how much the Fed could have done to prevent the 2008 recession, seems that was more congress and the SEC, but they were able to print a bunch of money and drop interest rates in order to get banks to start lending again. I’d like to think that the recovery happened faster than it otherwise would have because of the existence of a central bank.

Of course whether or not you call that a success is pretty subjective, but I’m not familiar with any countries without central banks that are handling their economies better than those that do have central banks.

Good move. Not worry about the actual implementation of a fucking stupid idea.

I don’t want to have to haggle over the value of dozens of different coins from different sources.
Especially since there’s no actual rate of exchange, you would have no idea of what your money is worth.

And how do we value this “hard money” in the marketplace? Won’t it be traded in USD terms? And in that case, isn’t that essentially what corporate bonds are?

Legal tender laws today are vestigial. They’re not relevant for anything.

Repealing legal tender laws would do absolutely nothing to displace the Federal Reserve.

I think the cryptocurrency experiment has been pretty interesting in that regard. For the most part, the value of all cryptocurrencies are locked to Bitcoin, which itself is only ever exchanged in terms of USD. It’s still in its infancy so maybe that will change, but so far nobody’s looking at Bitcoin as anything other than a stand-in for dollars.

Are there any countries without central banks?