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End the Fed

End the Fed - Ron Paul "…so when the money failed in the land of Egypt and in the land of Canaan, all the Egyptians came to Joseph and said,'Give us bread, for why should we die in your presence? For the money has failed.'" -Genesis 47:15 (King James Version)I got this book in January, after a snowstorm stranded my wife and I in Chicago for five days. Naturally, we did what any couple would do under the circumstances: we visited the Chicago branch of the Federal Reserve Bank.Truly, it was every bit as sickening as you might imagine. They have a visitors’ center, which tries to make light of all the damage their fake money does. At one point, I thought I was going to be sick.Believe me: there’s nothing I would have liked better than to have vomited all over that display, but I didn’t. We went on the tour, and Chizuru didn’t want me to make any scenes, so we agreed on one question I could ask the guide. I asked him: "Is the Federal Reserve a private institution, or governmental?" To avoid really answering, he said "Well, it’s complex… a little of both, really… but the [U.S.] President appoints the Chairman of the Federal Reserve, so you tell me." Nice try. I responded "The President always throws the first pitch of the season in baseball, but that doesn’t make the NBL part of the Federal government."Then Chizuru tugged on my arm, indicating that I was not to publicly humiliate him any further.Here’s my souvenir picture at the gates of Hell visitor center.Enough about that; let’s get to the review!If I’m going to read another book about the Federal Reserve (and if you’re going to read another of my reviews on the topic), it had better bring something new to the table. Ron Paul’s End the Fed does just that, examining some of the lesser-considered consequences of fiat currencies. The Congressman explains in very simple terms how the elasticity of fiat removes one of the biggest impediments to war: limited resources. Historically, societies with barter economies or commodities-backed money had to carefully allocate resources before deciding to go to war. Kings of old used to deliberate carefully when effectively choosing "between butter or swords". With fiat money, we can print enough dollars that we don’t have to choose; we can have both (for a while)! Ancient Romans found they were able to escalate their military adventures when they debased their metal-based currencies with lead, and the same principle is true in current day. Ultimately, however, this will cause a currency to loose its value. Roman payments to mercenary forces became necessarily greater and greater, until eventually the empire was unable to afford to protect its borders. By removing the constraints of commodity-based currency creation, modern industrial states can expand their money supply several fold, to accommodate military spending which would be unthinkable under a gold standard. (Shameless self-promotion: I touch on this in my Twilight review.) To illustrate the point in detail, Dr Paul examines the case of World War I. If ever there was a war that should have been avoidable by peaceful diplomacy, this was it. The death of Archduke Ferdinand is hardly reason to sacrifice 16 million people. Of course, the reasons war erupted are complex, but one factor favoring conflict was the military buildup in the preceding decade. The extravagant defense budgets of Western nations between 1900-1914 could never have been sustained under commodity-backed currencies, but most of these countries had recently abandoned the gold standard around the turn of the century. With their new elastic fiat currencies, they became flush with easily-printed cash, and began building expensive armies and navies on a far grander scale than ever seen before. America, with her newly-established Federal Reserve (1913) jumped on the band wagon, and began inflating the dollar. By 1917, the American monitary base had more than doubled, and much of this new money was spent on miltary hardware. Like clockwork, we entered the war in 1917. The rest of the 20th century followed this pattern, and saw an expansion of the money supply far greater than productivity could merit. Concurrently, America began to engage in more frequent and prolonged military adventures, projecting power around the globe. Don’t misunderstand the message here: fiat currencies don’t cause war, but they do remove an impediment to war, namely the financial constraints of less elastic monies.Moving on, Ron Paul exposes some of the internal contradictions within U.S. monetary policy:It has long been the belief of the Federal Reserve that money is worth whatever they say it is worth, but market forces haven’t always cooperated with this arrogant view. In the 1960’s, America began minting silver half-dollars. Even though millions of these were released into circulation, hardly anybody used them as money. The value of the silver content far exceeded the nominal 50 cents they were intended to represent. Consequently, the public hoarded them, preferring to use them as a long-term commodity-based store of value, rather than a short term fiat coin. Today, with silver valued at over $40 an ounce, you’d be an idiot to spend a silver half-dollar (whose silver content is 0.77 ounces) to buy 50 cents worth of goods! The situation is even more extreme with U.S.-minted gold coins.To expose the lie which is fiat money, a Las Vegas casino started paying its employees in U.S. mint gold coins in the 1980’s. An American "Gold Eagle" coin contains 1 oz of .999 pure gold, but its nominal value is only $50! Thus, the casino was able to convince its employees to work for minimum wage, provided they were partly paid in gold coin whose actual value far exceeded its nominal value (with gold at $1800/oz, I’d agree to work for $250 a week, provided you paid me with five $50 gold coins [actual value $9000]!) The benefit to the employees in this deal is that they could truthfully report on their taxes that they only made (for example) $100 a week, and could pay much lower income tax accordingly! Likewise, the casino benefited by paying less on payroll tax/contributions. It’s a genius ploy: use the lie of fiat currency against the system! What happened? The IRS successfully sued the casino for using U.S. government-minted coins at their face value!! How embarrassing, that the system administrators were so forced to confess that they, in fact, do not have the power to dictate the value of their own currency! The most enjoyable part of this book for me was the transcripts of debates and conversations Congressman Paul has had with various Chairmen of the Federal Reserve, over the years. At one point, he makes Alan Greenspan admit that every fiat currency in history has either failed, or is in the process of failing, while gold maintains a relatively constant long-term value. To his credit, Greenspan at least engages Dr. Paul in intelligent debate. Ben Bernanke is too childish and insecure to sustain much conversation with the Congressman. Unfortunately, there are no checks and balances on the Fed, so Bernanke is not required to account to anybody for his policies.On a more sober note, Ron Paul outlines how fiat money is consolidating political influence in the hands of fewer and fewer individuals. To preserve the façade of legitimacy, as money loses its value, more and more authoritarian measures will be needed to prevent a black market economy from completely supplanting the fiat system. This is the threat which fiat money poses to personal liberties, and it hardly matters what political environment or legal framework this occurs in; authoritarianism is the endgame of every failing monitary system. This is the real importance of this book, and my reason for reviewing it. All the fun pictures were just to draw you in. Sorry if you feel I've deceived you.For non-Americans out there, I still recommend reading this book. End the Fed is probably as relevant to you as it is to me, since most nations on Earth these days operate through some sort of fiat-based central banking system not significantly different from the American Federal Reserve. The principles in this book apply to almost every country. Read it, and see if you don’t agree your own fiat currency -whatever it may be- should be replaced with a commodity-backed medium of exchange.Here’s me in front of the Reserve Bank of Australia.Make today the day you take up the cause of Ending the Fed (and its foreign equivalents)!