The Worst Moment in Presidential Addresses. Ever.

Posted on January 26, 2011 by Brian Reilly in Opinion

Last night, President Barack Obama delivered the State of the Union address.

I decided to share what I think was the worst, most damaging idea/legislation/epicfail of any State of the Union or First Address to the nation.

Feel free to disagree.

Here we go…

“I turn to matters of domestic concern. You already have under consideration a bill for the reform of our system of banking and currency, for which the country waits with impatience, as for something fundamental to its whole business life and necessary to set credit free from arbitrary and artificial restraints. I need not say how earnestly I hope for its early enactment into law. I take leave to beg that the whole energy and attention of the Senate be concentrated upon it till the matter is successfully disposed of. And yet I feel that the request is not needed-that the Members of that great House need no urging in this service to the country.”

President Woodrow Wilson
December 2, 1913
First Address
Sixth Paragraph

Wilson was referring to the legislation for bill to create the Federal Reserve. That bill passed in the Senate and was signed into law three weeks later by Wilson.

The Federal Reserve is divided into twelve regional banks that control our money supply. This central bank can manipulate interest rates by arbitrarily inflating the money supply by buying and selling treasury notes or printing money.

All currency used to be backed by gold. The Federal Reserve Act eased that law.

The Federal Reserve Act was supported because people wanted a safety net to avoid bank foreclosures, but that highlight was not the main reason politicians wanted it. President Woodrow Wilson was a Democrat and progressive who believed in strong government intervention and control.

The Federal Reserve Act allowed for fractional-reserve banking, which means only a small percentage of the money your bank watches for you, actually has to be present in the bank. The rest of your money can be lent out.

Why is the Federal Reserve Bad?

Example 1:

Let’s say you have $100 and you want to buy some shoes. So you get in your car and drive to the shoe store. While you’re in the car the Federal Reserve decides to print some money. By the time you get to the store, your $100 may not be enough to buy the shoes. Your purchasing power has gone down by no fault of your own. Now, it may take $110 to buy the shoes you want.

Example 2:

Let’s say your best friend needs some cash. You lend him $100. The Federal Reserve prints more money, therefore, increasing the money supply. And your friend pays you back the $100. Now unless you charged your best friend any interest, you’ve lost money, even though you got your original $100 back. The value has been diminished.

Example 3:

Let’s say by great fortune you own a bank. And your bank needs to borrow some money overnight to cover some outstanding debt. Well sure Mr./Mrs. Bank Owner you can borrow money from the Federal Reserve. Here’s the interest rate that the Fed created.

This was not a new idea either. Our founders Thomas Jefferson and Alexander Hamilton disagreed over this. Hamilton wanted a strong central bank, while Jefferson wanted nothing to do with it.

Feel free to comment on any of the examples. Just remember the Federal Reserve Act signed by President Woodrow Wilson essentially ended the free market.

Are You Smarter than the Fed Chairman?

Posted on December 29, 2010 by Ben Froland in Opinion

One of the core fallacies of collectivism is the idea that individuals should relinquish some of their personal liberties and decisions to a central authority deemed to be much “smarter” or better educated. The absurdity of this belief is exemplified in the economic choices being made by Federal Reserve Chairman Ben Bernanke, whose actions are reckless and benefit only special interests rather than the American people. When the curtain is pulled back and the confusing terminology is pared down, you can see the ineptitude and corruption of these elites for yourself.

To recap, “quantitative easing” is simply printing money and, yes, that is every bit as bad as it sounds. Let’s say you have a rare baseball card and only 5 of them exist in the world. Your card would have great value due to its scarcity. One day, a large crate full of the same baseball cards is found in a warehouse. What happens to the value of your baseball card? That’s right, it is greatly reduced. The same logic applies to the supply of money. Printing more money reduces the value of the money already in circulation and you have less buying power.

While Wall Street has been much maligned as a “risky” place to invest for your retirement, Bernanke’s actions will devastate even the most cautious of investors. If you know someone who has saved their entire life for retirement, and has it in the bank as savings for “safety”, the value of their nest egg can be wiped out by the printing press. To add to their pain, inflation will kick in as the Fed looks to pull back in the money they printed in the first place.

Ultimately, the Fed will continue to create many of the problems that it was instituted to combat. It has been an utter failure since its birth in 1913 which shouldn’t be a surprise to anyone.  A bureaucrat heading a cabal of banks is ill-equipped to make boots-on-the-ground economic decisions for you the individual and doesn’t have your well-being at heart.

“If the debt which the banking companies owe be a blessing to anybody, it is to themselves alone, who are realizing a solid interest of eight or ten per cent on it….the truth is, that capital may be produced by industry, and accumulated by economy; but jugglers only will propose to create it by legerdemain tricks with paper.” – Thomas Jefferson