Don't Reform The Fed, Fed-Exit!

Opponents of a central bank should take advantage of the post-Brexit vote revival of secessionist sentiments to promote a secession from central banking, or “Fed-exit.” Ending the Federal Reserve's monopoly on money is the key to restoring and maintaining our liberty and prosperity.

By manipulating the money supply to fix interest rates, the Federal Reserve engages in price fixing. After all, interest rates are nothing more than the price of money. Like all prices, they communicate information about economic conditions to market actors. Federal Reserve attempts to override the market rate of interest with a Fed-favored rate distort the price signals sent to businesses, investors, and consumers. The result of this distortion is a Fed-created boom, followed by a Fed-created bust.

The Fed’s action affects the entire economy and impacts the lives of all Americans, as well as of people around the world. Therefore, it is no exaggeration to say that the attempt to fix interest rates is the most harmful example of price fixing.

Many who normally oppose government intervention in the marketplace claim that central banking could work if only the Fed adhered to a monetary rule. Supporters of a “rules-based” monetary policy claim that a rules-based approach will bring stability and predictability to monetary policy, and thus put the economy on a path to permanent prosperity. But under a rules-based monetary policy, the Federal Reserve retains the power to manipulate interest rates. So under a rules-based approach, investors and entrepreneurs would still receive distorted price signals, which would still result in a boom-bust cycle. No rule can fix the flaws inherent in our system of monetary central planning.

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