Abolish the Fed

IT MAY BE IMPOSSIBLE TO IMAGINE AMERICA WITHOUT THE FEDERAL RESERVE, BUT A CENTRAL BANK IS NOT ESSENTIAL TO A FUNCTIONING ECONOMY.

- BRIAN DOHERTY

IN A 1995 interview, I asked Milton Friedman whether "it would be preferable to abolish the Fed entirely and just have government stick to a monetary growth rule?" Friedman answered: "Yes, it's preferable. And there's no chance at all of it happening." He didn't live to see the abolition of the Fed; perhaps no one reading this will. Still, a couple of years after Friedman's 2006 death, a semi-mass movement calling to "End the Fed!" arose in the aftermath of Rep. Ron Paul's first Republican presidential run in 2008.

The Texas congressman found during that campaign a surprising (even to him) number of youngsters blaming the central bank, founded in 1913, for government sins from inflation to war (which is easier to wage when it can be financed by cash from a central bank summoned more or less at will).

The Fed's performance since Paul's campaign has not blunted the urgency of the message. From 2008 to 2011, the central bank spit out as much new money as had entered the U.S. economy in the previous century, and it grew the value of the financial instruments it bought as an instrument of this money generation by $1.35 trillion in just part of 2008.