For those who follow the arcane world of monetary policy, the U.S. Federal Reserve remains a shadowy institution with immense power, yet shockingly little oversight. Despite its 100 year history, the Fed has never been fully audited, and although a bill to do that very thing is languishing in the Senate right now, Harry Reid shows little inclination to bring it to a vote.
Of course, simply auditing the Fed is only a first step for many in liberty movement, who view the central bank’s abolition as the only way to ensure sound money in America. Critics of this view often answer back, “Well, if not the Fed, then what?”
This is frequently said with the air of an unanswerable knockout punch, an end to the debate. Actually, there are several credible alternatives to the Federal Reserve as the sole arbiter of the U.S. money supply.
Most people don’t realize that the Fed has not always existed. Prior to 1913, the United States had no central bank. Instead, the country operated on a strict gold standard in which all currency was denominated in terms of its weight in gold ounces, and could be exchanged for said gold on demand. A return to a gold standard today would reduce volatility and unpredictability in the money supply, and limit the government’s ability to create inflation through mass printing.
A second option, promoted heavily by Nobel Prize-winning economist F. A. Hayek, was the idea of multiple currencies competing alongside one another, just as multiple types of consumer goods compete. There would be no one central authority, but many, and their success would depend upon their stability and general desirability as a medium of exchange.
This may sound like an extreme idea, but in fact we already see it in action on a global scale with competing foreign currencies, and with the advent of the digital currency Bitcoin, we are increasingly seeing competing currencies in action.
The Federal Reserve was created with the goal of increasing stability in the economy, but in the century since it began, recessions have been longer, deeper, and more frequent than they ever were before. This is, after all, the period that gave us both the Great Recession and the Housing Crisis from which we still haven’t fully recovered. Given these facts, we at least owe it to ourselves as a society to consider alternatives to the Fed, and not dismiss the idea out of hand.
To learn more, check out FreedomWorks University’s brand new course on “Alternatives to the Fed.”