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Has anyone bothered to steelman the argument for the Federal reserve as opposed to simply paying off government debt as it comes due with fiat money and henceforth financing the government with the same?
All the arguments about inflation seem patently ridiculous when one considers not only that the interest payments exponentially increase downstream spending but that providing capital a financial backstop risk-free is corrupting the very productive sector that you need to avert inflation by turning capitalists into welfare Queens.
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I think the question is whether an accelerated controlled collapse of the system to be replaced by a successive system would be a faster way towards recovery – than an attempt to fix the system.
At what point do you stop fixing a car and get a new one?
The AI technology makes it surprisingly easy to rebuild systems - and the existing societal architectures are horribly baroque.
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The argument for repealing the Fed Reserve Act of 1913? Is Fed Reserve Act constitutional? Depends who you ask and maybe that is the problem…
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I asked Grok and here is what he said…
The constitutionality of the Federal Reserve Act of 1913 has been debated since its passage, with arguments on both sides rooted in differing interpretations of the U.S. Constitution. Below, I’ll outline the key points for and against its constitutionality, focusing on legal reasoning and relevant constitutional provisions, while keeping the discussion concise and balanced.
Arguments Supporting Constitutionality
Congressional Authority Under the Commerce Clause (Article I, Section 8, Clause 3):
- The Constitution grants Congress the power to “regulate Commerce with foreign Nations, and among the several States.” Proponents argue that a national banking system, like the Federal Reserve, is a legitimate exercise of this power because it regulates the flow of money, credit, and economic activity across state lines and internationally.
- The Supreme Court has historically interpreted the Commerce Clause broadly, as seen in cases like Gibbons v. Ogden (1824), to include activities affecting interstate commerce, such as banking.
Necessary and Proper Clause (Article I, Section 8, Clause 18):
- Congress is empowered to “make all Laws which shall be necessary and proper” for executing its enumerated powers. The Federal Reserve Act, which established a central bank to manage currency and stabilize the economy, is seen as a necessary tool for exercising Congress’s powers over currency and commerce.
- In McCulloch v. Maryland (1819), the Supreme Court upheld the creation of the Second Bank of the United States, ruling that Congress could create institutions (like a national bank) if they are rationally related to its enumerated powers. This precedent supports the Federal Reserve’s constitutionality.
Currency Regulation (Article I, Section 8, Clause 5):
- Congress has the explicit power to “coin Money, regulate the Value thereof, and of foreign Coin.” The Federal Reserve Act delegates some of this authority to a central banking system to issue currency (Federal Reserve Notes) and manage monetary policy, which proponents argue is a valid exercise of this power.
Historical Precedent and Judicial Deference:
- The Supreme Court has never directly ruled the Federal Reserve Act unconstitutional. Challenges, such as First National Bank v. Fellows (1917), indirectly upheld aspects of the Federal Reserve system by affirming Congress’s authority to regulate banking.
- Courts have generally deferred to Congress on matters of economic policy, viewing the Federal Reserve as a legitimate exercise of legislative discretion.
Arguments Against Constitutionality
Lack of Explicit Constitutional Authority:
- Critics argue that the Constitution does not explicitly authorize Congress to create a central bank or delegate monetary policy to a quasi-private entity like the Federal Reserve. The Tenth Amendment reserves powers not delegated to the federal government to the states or the people, and opponents claim the Federal Reserve exceeds this boundary.
- The Framers, such as Thomas Jefferson, opposed centralized banking, arguing that only Congress should directly control currency issuance without delegating to a private or semi-private institution.
Delegation of Power Concerns:
- The Federal Reserve Act delegates significant monetary policy authority to the Federal Reserve Board and regional Federal Reserve Banks, which are not fully public entities. Critics argue this violates the non-delegation doctrine, which holds that Congress cannot delegate its legislative powers to other entities.
- While the Supreme Court has upheld delegation when Congress provides an “intelligible principle” (e.g., J.W. Hampton Jr. & Co. v. United States, 1928), critics contend that the Federal Reserve’s broad discretion over monetary policy lacks sufficient congressional oversight.
Private Nature of the Federal Reserve:
- The Federal Reserve System includes private member banks that own stock in the regional Federal Reserve Banks, leading some to argue it is an unconstitutional transfer of public power to private entities. Critics claim this structure undermines democratic accountability and conflicts with the Appointments Clause (Article II, Section 2), as Federal Reserve officials are not appointed in a manner consistent with constitutional requirements for public officers.
Historical Context and Original Intent:
- Opponents, including some strict constructionists, argue that the Framers intended a limited federal government and would have opposed a central bank. The First and Second Banks of the United States (1791–1811, 1816–1836) were controversial, with figures like Andrew Jackson arguing they were unconstitutional. Critics extend this logic to the Federal Reserve.
Legal Status and Practical Considerations
- Judicial Record: No major Supreme Court case has struck down the Federal Reserve Act as unconstitutional. The Court’s broad interpretation of Congress’s powers under McCulloch v. Maryland and subsequent cases supports its legality.
- Practical Impact: The Federal Reserve has operated for over a century, deeply integrated into the U.S. economy. Any challenge to its constitutionality would face significant practical and legal hurdles, as courts are reluctant to disrupt established economic systems.
- Ongoing Debate: Critics continue to challenge the Federal Reserve’s structure, often citing its independence or private elements, but these arguments have not succeeded in court. Proposals to audit or reform the Federal Reserve (e.g., via legislation like the “Audit the Fed” bill) reflect ongoing skepticism but do not directly address constitutionality.
Conclusion
The Federal Reserve Act of 1913 is generally considered constitutional under the Supreme Court’s interpretation of Congress’s powers over commerce, currency, and necessary legislation, as established in cases like McCulloch v. Maryland. However, critics raise valid concerns about delegation, the private-public structure, and fidelity to the Constitution’s original intent, though these have not prevailed in court. Without a direct Supreme Court ruling striking it down, the Act remains legally valid, though the debate persists among scholars, economists, and constitutional theorists.
Here’s a prediction the managerialists at Metaculus won’t permit:
“By 2030, at least one family member of the Federal Reserve Board of Governors will be killed by and credit taken by a mean nasty nazi running corruption of blood and stuff who says the Federal Reserve Act was unconstitutional.”
You should be with me on some of my EMS calls to old people around Iowa who I get to know. They are alone. Their children haven’t had children*. Their bloodlines are being terminated en masse. Meanwhile the big pots of gold collected by centralization of land ownership are being put into “revitalization” NGOs with the decisions being made by people who think there would have been no serious civil disruption if Trump had been killed.
https://x.com/jabowery/status/1940764327625347486
* Oh wait… I know a first responder whose children did have children — grandchildren who insist on not being called by their “dead name”.
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Can you please elaborate on what you mean by this? Are you saying you believe there *would* have been serious civil disruption? I think the American population is sufficiently anesthetized that any civil disruption would be relatively minor and quelled quite quickly. There’s a lot of “big talk” out there about what people are going to do if x, y or z ever happens, but nobody ever does anything (and that’s probably a good thing).
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Yes. There would have been and no it would not have been easily quelled.
You’re living in a dream world about all that “big talk”.
Trump is the only thing standing between talk and a rhyme with The Thirty Years War. They’re trying to get Vance positioned to take his place and they’re doing a pretty good job of it but it is still dicey.
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Call me when something actually happens. “Seeing is believing” as they say. 
Speaking of believing, I happen to believe that there’s a non-zero chance that the assasination attempts were staged. To what end? I have several guesses. But anyway, I suspect the powers that be will probably not incite a revolution-inducing event unless it gives them some advantage. And why would they? The slow boiling frog approach combined with “soma” is working marvelously.
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It takes a while for a people to give up hope. One form of hope is that, as you say, “and that’s probably a good thing.” that’s your Soma. Soma has the effect of keeping people from preparing for “the bad thing” which means I won’t bother calling you because you’ll likely be maggot food.
And, of course there’s a nonzero chance of Trump’s assassination attemptS being “staged”.
Where were you when I was warning people of an impending turn of the millennium false flag?
Who do you think you’re talking to?
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Possibly, but my plan is to jump ship and move to greener pastures (assuming any exist). Time will tell which plan works out the best, but I wish everyone well!
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