Why Does the Government Fear Deflation?

by Gerard Emershaw

Federal Reserve Chair Janet Yellen has said that the United States economy is still in need of stimulus because unemployment and inflation are well short of the Federal Reserve’s goals. Yellen claims that the inflation rate is below the Federal Reserve’s target of 2%.

Inflation hurts the average American consumer. The prices of goods and services became more expensive. The Federal Reserve’s “printing” of money has destroyed the value of the dollar over the decades, eroding up to 95% of its purchasing power. Why is this a good thing? Even if it is a good thing, is it true that there is virtually no inflation? The Federal Reserve uses the Bureau of Labor Statistics’ Core CPI (Consumer Price Index) as its measurement of inflation. The Core CPI does not include prices of food and fuel. Without taking these important economic factors into account, how can anyone be sure what the inflation level is? If the rate of inflation were to be measured in the same way that it was calculated in 1990 before the federal government began hiding the true inflation rate, it would be 5% and not under 2%.

The Federal Reserve and the federal government in general are fans of inflation. Deflation is what they fear and dread. The worst thing that they can imagine is that the prices of goods and services should fall. Imagine the horror if all of a sudden the dollar could buy more. Imagine the evils that would arise if suddenly struggling American families could put more food on the table for the same amount of money. Nearly 15% of Americans are food insecure—including approximately 25% of black and Hispanic households. Imagine the apocalypse that would arise if the working poor could afford more food and worry less about their families being food insecure. The horror! The horror!

Deflation is bad. Or at least that’s what the Federal Reserve, the federal government, and economists like Paul Krugman tell us. Paul Krugman is a genius. At least that is what he and the left-wing media constantly tell us. Paul Krugman is such an enlightened Keynesian that he believes the magic bullet to save the economy is an alien invasion: “If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.” Given that Mr. Krugman has apparently read the graphic novel Watchmen or perhaps has watched a few too many “Twilight Zone” episodes, of course he knows what he is talking about.

Mr. Krugman believes that deflation is bad:

So first of all: when people expect falling prices, they become less willing to spend, and in particular less willing to borrow. After all, when prices are falling, just sitting on cash becomes an investment with a positive real yield– Japanese bank deposits are a really good deal compared with those in America—and anyone considering borrowing, even for a productive investment, has to take account of the fact that the loan will have to repaid in dollars that are worth more than the dollars you borrowed. If the economy is doing well, all this can be offset by just keeping interest rates low; but if the economy isn’t doing well, even a zero rate may not be low enough to achieve full employment.

And when that happens, the economy may stay depressed because people expect deflation, and deflation may continue because the economy remains depressed. That’s the deflationary trap we keep worrying about.

He must be right. After all, The New York Times believes that Paul Krugman is a genius, so he must be. Plus, he came up with that brilliant idea to spend money to build up arms to defend against imaginary little green men. That idea is even more brilliant than Keynes’ idea to save the economy by paying workers to dig holes and then fill them in again. Given that Krugman is correct, it is true that American consumers have not bought laptops and tablets, flat screen TVs, or smartphones. These high-tech items have been getting both better and less expensive. Therefore, it is the case that most Americans are still using their Commodore 64s, still watching their black and white console televisions with rabbit ears, and still communicating with soup cans connected by strings. Since they know such high-tech goods will drop in price, they will defer such purchases. Perhaps indefinitely. Wait. These items are popular? Actually, they are becoming rather ubiquitous. Given that Krugman is such a genius and must be correct, it would be folly for a retail chain like Walmart to advertise a policy of falling prices. If widgets are advertised by Walmart as having “falling prices,” then consumers will put off buying widgets. After all, they’ll be cheaper tomorrow. So, of course, Walmart must be nearing bankruptcy since consumers will not spend money if they even suspect prices may be lower tomorrow. Somehow, Walmart earned $17 billion in profits in 2013.

It appears that Americans will spend money even if prices are falling. In general, the American consumer will nearly always spend money—whether he or she has it or not. If anything, lower prices will likely cause them to spend even more money than they normally do. After all, many Americans have the bad habit of buying things not because they need them, but simply because they are on sale. If anything, deflation would increase demand and increase spending.

Krugman also believes that deflation is bad because it increases the burden of debtors:

A second effect: even aside from expectations of future deflation, falling prices worsen the position of debtors, by increasing the real burden of their debts. Now, you might think this is a zero-sum affair, since creditors experience a corresponding gain. But as Irving Fisher pointed out long ago, debtors are likely to be forced to cut their spending when their debt burden rises, while creditors aren’t likely to increase their spending by the same amount. So deflation exerts a depressing effect on spending by raising debt burdens – which, as Fisher also points out, can lead to another kind of vicious circle, in which depressed spending because of rising real debt leads to further deflation.

Out of control spiraling deflation would certainly not be a good thing. That would cause debtors to be unable to service their debts, and this would lead to massive bankruptcies. However, nobody is talking about that. If one assumes that all deflation is dangerous deflation of this kind, then in fairness, one must also assume that all inflation is Weimer Republic wheelbarrow hyperinflation. With mild deflation, the increase in real debt of debtors will be offset in good part by the fact that the debtors will be able to purchase more with their money. This will allow them to have more money to apply to their debts since they need to spend less on goods and services. Mild deflation will also encourage investments of all sorts. Those who do defer spending are likely to invest their money—even if that investment is as simple as placing money in an interest bearing bank account. Some will win and some will lose in the end. But that is always the case. Some debtors will be burdened. However, creditors will earn more money and will have more money to spend and invest. Some of those lucky creditors may even be Kurgan’s alien friends.

Finally, Krugman worries about falling wages. This was a constant worry during the Great Depression. And in fact, it was President Herbert Hoover and President Franklin D. Roosevelt’s unwillingness to allow wages to drop along with prices that exacerbated the Great Depression. According to Krugman:

Finally, in a deflationary economy, wages as well as prices often have to fall—and it’s a fact of life that it’s very hard to cut nominal wages—there’s downward nominal wage rigidity. What this means is that in general economies don’t manage to have falling wages unless they also have mass unemployment, so that workers are desperate enough to accept those wage declines.

This assumes that the economy will be more or less stagnant. However, regular mild deflation will likely spur the economy as consumers have more money to spend and invest. Wage levels are always in great part affected by unemployment levels. When the economy has high levels of unemployment, wages will drop as there are more workers willing to do the job for less. However, at times of near “full employment,” wages inevitably rise because workers who can fill job openings become more scarce. Therefore, deflation is unlikely to harm workers. Any drop in wages will be offset by a drop in prices. As employers’ dollars have more buying power, it is also likely than many of them will hire additional workers. This falling wage fear is a delusional relic of the Progressive Era.

Why do the Federal Reserve, the federal government, and statist economists like Paul Krugman actually favor inflation? The answer is simple. Inflation allows the government to play its economic shell games. It allows the federal government to “tax” the people through the mechanism of the Federal Reserve. It allows the federal government to spend money on its welfare/warfare empire without actually having to openly raise taxes. Inflation makes banksters like those behind the Federal Reserve even wealthier by redistributing money from American citizens to the banks and their cronies. In the long run, as Keynes said, we are all dead. But in the slightly shorter run, inflation makes more citizens dependent on the state by draining the value of their dollars. This means that more Americans will rely on government largesse, and as a result, more Americans will be loyal. As this happens, fewer will protest against unconstitutional wars of aggression, mass illegal domestic surveillance, or any other type of tyranny. Inflation enslaves the people. All statists ultimately love that idea.

Ben Bernanke: The Mad Hatter

It is always absurd to read anything that praises Federal Reserve Chairman Ben Bernanke. A panegyric to him inevitably puts one in mind of mad hares, grinning cats, and hookah-smoking caterpillars. In a recent Financial Times article, Edward Luce dubbed Bernanke “a good engineer who knows his limits.” Mr. Luce drags out all the well-rehearsed “jam tomorrow” Keynesian arguments in attempting to state the case that the Federal Reserve under Bernanke has been “the only serious economic actor” in Washington for the past five years.

According to Luce, Bernanke’s easy money policies are the reason that the American economy is not in even worse shape:

Without the Fed’s easy money, the stock market would be languishing and unemployment would be rising. Instead of “helicopter Ben” dropping reserves from the sky it would be “lawnmower Ben” shredding the green shoots of the recovery.

As always, when the Federal Reserve’s policies are ineffective – or even counterproductive – a Keynesian apologist always claims that without the Federal Reserve, an economic apocalypse would have been the result. This unsupported assumption is akin to a New York Mets apologist claiming that were it not for the brilliant leadership of Casey Stengal in 1962, the team would have lost even more games than the 120 it did manage to lose.

Luce credits Bernanke’s scholarly knowledge about the Great Depression with providing the insights behind the Federal Reserve’s recent maneuvers:

As a scholar of the Great Depression, he understood its chief cause was the extinction of credit: the US escaped the slump because it went off the gold standard. The New Deal had little to do with it.

These oft-repeated Keynesian talking points are too mad even for a hatter to believe. Easy money policies do not help the economy. It was the easy money policies of the 1920s that set forces in motion that would lead to the Great Depression. Even more absurd is the claim that going off the gold standard ended the Great Depression. President Franklin D. Roosevelt removed the United States from the gold standard on June 5, 1933, yet the Great Depression did not finally end in the United States until after the end of World War II. The only thing that the destruction of the gold standard did was to allow banks to maximize profits as the Federal Reserve “printed” money and quickened the destruction of the American dollar through inflation. Luce is correct in pointing out that the New Deal had nothing to do with the ending of the Great Depression in the United States. What did bring about the end of the Great Depression was the lifting of corporatist regulations and a return to a free market economy and the resultant unleashing of the productive capacity of the American economy against competitors whose factories lay in rubble.

According to Luce, the Federal Reserve under Bernanke has been the only force of good besides President Obama in working to fight against the Great Recession:

For the bulk of the past five years, the Fed has been the only serious economic actor in Washington – and remains so today. With the big exception of President Barack Obama’s 2009 stimulus, it alone has tried to find ways to keep the US economy afloat. Since 2011, fiscal policy has been a drag on the recovery. US growth is expected to hit about 2 per cent in 2013. Were it not for the fiscal cliff and the sequestration, it might be heading for 3 per cent.

The long debunked myth that a nation can spend and inflate its way to prosperity will just not die.  

Despite quantitative easing having no discernible effect on the unemployment rate, Luce rationalizes it and justifies the continuation of QE3 by claiming that inflation is not a problem:

At the open market meeting next week, Mr Bernanke is likely to come under renewed pressure to take his foot off the pedal. Last Friday’s strong jobs report will bolster those arguing that the risks are now tipping towards inflation. But they have been sounding the same alarm for four years. In the last year, US inflation has fallen to 1.6 per cent. And unemployment is still at 7.7 per cent. Mr Bernanke will get to keep QE3.

Luce – like many Federal Reserve apologists – refuses to let the facts get in the way of a good story. As far as the federal government’s inflation calculations go, the Emperor has no clothes. The government’s Consumer Price Index (CPI) calculation conveniently exempts food and energy prices in order to hide the actual alarming inflation rate. If the CPI were more honestly calculated – as it had been in the past – inflation would be calculated at closer to 10 percent. High inflation rates only further impoverish the middle class and the lower classes by redistributing wealth to banks, government, and government cronies.

The Federal Reserve is an unconstitutional bank cartel that should only exist on the other side of the Looking Glass. Unfortunately, it is very real. “No wonder you're late. Why, this watch is exactly two days slow.”

The National Debt Shell Game

The looming “fiscal cliff,” “fiscal curve,” or whatever you want to call it is a red herring. In effect, all that it really does is provides filler for 24 hour news channels so that they do not have to bother reporting on real news. There is simply no way to make a few spending cuts here or there or to raise taxes in this tax bracket or that tax bracket in order to solve the debt crisis. Even if all discretionary spending – military spending and all spending other than mandatory spending – were cut completely, the United States would not balance the budget based upon the tax revenues that it currently receives. Furthermore, the amount of tax increases necessary to cover mandatory spending – Medicaid, Medicare, Social Security, Food Stamps, Unemployment, debt interest, tax credits, and student loans – would likely cripple an already hobbled economy and require even further increases in mandatory spending to cover even more needy Americans that would result.

The federal government is going to be forced to make tough choices – something that is has proven to be ineffective in doing. The entitlement system is going to have be radically overhauled. Social Security may have to be altered with means tests, higher retirement ages, and smaller payments or even eventually privatized like in Chile. Other “social safety net” programs such as Medicaid, Medicare, Unemployment, etc. – which are patently unconstitutional – may have to be transferred entirely to the states in line with the Tenth Amendment. Only a leaner and more “Constitution-sized” government is one that Americans will ever be able to afford to fund.

However, this is not to say that military spending and all other discretionary spending should not be cut wherever possible. If responsibility for entitlement programs were to be returned to the states in a Constitutional fashion, American taxpayers will require savings in federal taxes in order to pay for inevitable increases in state taxes. In particular, the Military-Industrial Complex can no longer be a sacred cow. If the nation were to return to the noninterventionist foreign policy of the Founders, then defense spending could easily be reduced significantly. Ending the Drug War, getting rid of federal regulations that are often expensive to enforce, and completely eliminating all nonessential and unconstitutional executive branch agencies would also save money.  Corporatist social welfare (which costs nearly $100 billion per year) must also be eliminated as well as counterproductive blowback inducing foreign aid (over $50 billion per year).  

Perhaps most importantly, the Federal Reserve must be abolished. The federal government must regain its constitutional control of the currency in order to allow free market forces to grow the economy.  Unless and until American leaders in Congress and the White House get real, the whole debate on taxes/spending and the debt is just a charade.  

The Patent Unconstitutionality of the Federal Reserve

A group of the world's most powerful men, including an influential United States senator, three powerful international bankers, and the Assistant Secretary of the United States Treasury gather for a week for a clandestine meeting at a secluded resort co-owned by one of the wealthiest bankers in the world. When they emerge, they have hatched a plot that with one vote in Congress will give their cartel virtually unlimited power over the United States economy and its currency. These machinations will give them the power to completely direct the American economy. They will be able to inflate the currency at will, redistribute wealth from the American people to their cronies, and give the corrupt United States government the power and means to wage unlimited wars of aggression and to create schemes to gain more and more power over the American people. If you think that this sounds like the plot of a Tom Clancy novel or one of the seasons of "24," think again. These events actually occurred, and the repercussions continue to haunt us today. As the republic stands on the verge of economic collapse, we can only look back at December 23, 1912, a day which truly will live in infamy.

On November 22, 1910, a group of men including Senator Nelson Aldrich, bankers Henry Davison, Paul Warburg, and Frank Vanderlip, and Assistant Secretary of the Treasury A. Piatt Andrew gathered at the Jekyll Island Club, a coastal Georgia resort co-owned by banker J.P. Morgan, one of the wealthiest men of the day. Aldrich was a powerful Progressive Republican Senator who had been dubbed "General Manager of the Nation" because of his central position on the Senate Finance Committee from which he dominated American economic policy in the early twentieth century. His daughter Abigail had been married to John David Rockefeller, Jr., the sole son and heir of oil magnate John D. Rockefeller, since 1901, essentially making Aldrich unofficial American royalty. Davison was a Senior Partner at J.P. Morgan & Company, the powerful commercial and investment banking institution which had financed such mighty corporations as the United States Steel Corporation. Warburg, a German immigrant, was a partner in Kuhn, Loeb & Company, one of the most influential investment banks in the late nineteenth and early twentieth centuries. Vanderlip was president of the National City Bank of New York. Andrew was Assistant Secretary of the Treasury and had previously served as Director of the Mint and as an editor of publications of the National Monetary Commission, a government think tank that studied European central banks and sought to create such an entity in the United States. During the week long meeting, these powerful men, who represented an estimated one quarter of all the world's wealth, hammered out the plan for what would come to be the Federal Reserve. This plan was put into motion through the Federal Reserve Act, enacted on December 29, 1913. Through single votes in the Congress, where it passed in the Senate by a vote of 43 to 25 in the Senate and by a vote of 298 to 60 in the House of Representatives, the Act passed and was signed by President Woodrow Wilson.

What precisely is the Federal Reserve? Given its name, most Americans likely assume that it is a government entity. However, nothing could be further from the truth. Although it claims to not be owned by anybody and claims it is "not a private, profit-making institution" but is instead an independent entity within the government with both "public purposes and private aspects," this is simply not true. In fact, the Federal Reserve is owned by its member institutions, which are all private banks. Its powers continue to increase, and it is more clandestine in many ways than even the CIA, with not even a Congressional audit currently permitted for transparency and accountability. What does the Federal Reserve do? In the Federal Reserve Act, which established the entity, Congress said that the Federal Reserve was created "to furnish an elastic currency, to afford the means of discounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." "A more effective supervision of banking" was sought to deal with banking panics such as the one in 1907 which nearly crippled the nation financially. However, this was clearly just an excuse, as such a powerful entity is not needed to supervise banking. Creating something like the Federal Reserve for that would be akin to using a nuclear bomb to swat a fly. The more important thing to contemplate is the notion of "an elastic currency." What is an elastic currency? It is ultimately "funny money," fiat currency which is backed by nothing and is subject to manipulation which inflates it over time, destroying its value and leaving Americans poorer with each passing year due to the inflation. It is currency which can be effectively created out of thin air through such complex practices as open-market operations, the changing of reserve ratios, and manipulating interest rates. It was these kinds of machinations by which the Federal Reserve caused the Great Depression and the current economic crisis.

The pattern is always essentially the same. Thomas Woods, Jr. describes this pattern in a clear fashion in his book Meltdown:

"When the Federal Reserve pushes down interest rates by increasing the money supply, it encourages a boom in the production of longer-term projects: raw materials, construction, and capital goods in general. The boom in construction and real estate this past decade, made possible by these low interst rates, is a good example. Unlike the production that genuine consumer demand stimulates, though, the Fed's artificial stimulus is not in line with real consumer demand, and it encourages more and different kinds of projects to be undertaken than the economy can sustain. The necessary resources to complete all these projects profitably do not exist. Neither the saved resources to complete them, nor the consumer base to purchase the finished products, exist in sufficient volume."

During the 1920's the amount of money increased fifty-five percent due to inflationary policies pursued by the Federal Reserve during the decade. This increase took the form of additional loans to businesses. This pumped up "bubble" created by these inflationary policies, famously burst when the stock market collapsed in 1929. If the government reacted to this prudently by allowing the markets to correct, what became known as the Great Depression would likely have been avoided as such a depression had been avoided at the beginning of the decade. During and after World War I, the Federal Reserve had been inflating the money supply and when it eventually raised the rate at which it lends to banks, it caused the economy to slow drastically. Instead of meddling with the market in a totalitarian manner as Hoover and Roosevelt did a decade later, President Harding simply allowed the markets to correct. As a result, nearly nobody has ever heard of the Depression of 1920.

Similar machinations caused the current financial crisis. The Federal Reserve increased the money supply by lowering key interest rates to historic lows. This caused people to purchase things like half million dollar homes that they could not afford. For the very same reasons as with the Great Depression, the bubble that the Federal Reserve artificially inflated with its machinations burst, causing financial difficulties to spread throughout the economy.

Whether the Federal Reserve is a menace that causes the boom/bust economic cycle as Austrian economists such as Hayek and von Mises claim or is a necessary and benevolent force such as economist Milton Friedman believed is immaterial at the end of the day. The important issue is whether the Federal Reserve is constitutional. Only if it is constitutional must we even debate the merits of the institution.

Article I, Section 8 of the Constitution gives the Congress, among its other enumerated powers, the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures." In effect, through its control of the interest rates, it is the Federal Reserve that is now regulating the value of American currency. It is also effectively coining money by inflating the amount of currency in circulation. The Constitution gives Congress no authority to delegate its enumerated powers to other government entities, let alone to delegate them to private banks.

So how did this happen? How did a clandestine consortium of private bankers gain the power to control the economy, control interest rates, and in effect control our currency? To find the answer, we need to go back to 1819 and the infamous case McCulloch v. Maryland, a black eye for the Supreme Court and the death knell for limited government and liberty. The case involved the State of Maryland's practice of taxing any bank within the state which operated without state authority. This included the Baltimore branch of the Second Bank of the United States, a much weaker ancestor of the Federal Reserve. In addressing the question of whether Congress has the power to charter a bank, the majority opinion, authored by Chief Justice Marshall, himself no lover of limited government and no friend of freedom, begins by acknowledging that the United States federal government is one of enumerated powers and that among its enumerated powers cannot be found the powers to establish a bank or to create a corporation. So far, so good. But then the Court employs a strategy of beating liberty over the head with missing adverbs in the Constitution and with infelicitous linguistic analysis. The Court examines the Tenth Amendment, which unambiguously states "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The Court points out that the Constitution omits the word 'expressly' in the text of the Tenth Amendment and claims that this leaves "the question whether the particular power which may become the subject of contest has been delegated to the one government, or prohibited to the other, to depend on a fair construction of the whole instrument."

What? Somehow the fact that the drafters of the Tenth Amendment did not use superfluous adverbs like some Romantic novelist creates ambiguity where clearly none exists? What could be more clear? First, the Court itself admits that the powers to charter a bank and to create a corporation are not among the enumerated powers of the federal government. Second, nowhere in the Constitution does it prohibit the powers to charter banks and create corporations to the states. Therefore, these powers are "reserved to the States respectively, or to the people." Where in the world is the ambiguity here?

The Court next appeals to the Necessary and Proper clause of Article I, Section 8 of the Constitution. This clause, among the enumerated powers of Congress, states that Congress has the power "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers and all other Powers vested by this Constitution in the Government of the United States or in any Department or Officer thereof." The Court finds within the enumerated powers of Article I, Section 8 "the great powers to lay and collect taxes; to borrow money; to regulate commerce; to declare and conduct a war; and to raise and support armies and navies." It concludes that a central bank is necessary for the exercise of these enumerated powers.

However, Marshall recognizes that more work is needed in order to justify the power of Congress to charter a bank. It is clear that further argument is needed because something far more modest than a full fledged banking corporation could do the job of allowing Congress to exercise the aforementioned enumerated powers. Something as modest as a warehouse to store government monies would likely do the trick. Although itself constitutionally dubious from the point of view of originalism (due to it being an illicit delegation of Congressional power to the executive branch), by 1819, the Department of the Treasury already existed. It is completely unclear why this body could not have done what the Court thought "necessary" to allow exercise of the enumerated powers in question. Among the basic functions of the Department of the Treasury (which can presently be found spelled out on their official website) are:

• Managing Federal finances;
• Collecting taxes, duties and monies paid to and due to the U.S. and paying all bills of the U.S.;
• Currency and coinage;
• Managing Government accounts and the public debt;
• Supervising national banks and thrift institutions;
• Advising on domestic and international financial, monetary, economic, trade and tax policy;
• Enforcing Federal finance and tax laws;
• Investigating and prosecuting tax evaders, counterfeiters, and forgers.

Clearly, using these functions, the Department of the Treasury could have done what the Court deemed necessary.

Precisely what is necessary in order to exercise the enumerated powers of Congress that Marshall specifically names that the Department of the Treasury cannot do? Why was the Second Bank of the United States necessary in 1819 and why is the Federal Reserve necessary now? The Court attempts to sidestep this issue by putting a strange gloss on the Necessary and Proper clause. Marshall claims that the word 'necessary' "frequently imports no more than that one thing is convenient, useful, or essential to another." He then claims that "a thing may be necessary, very necessary, absolutely necessary, or indispensably necessary. To no mind would the same idea be conveyed, by these several phrases." It is difficult to determine what sort of fictional lexicon that Marshall employed in coming up with this strange interpretation. 'Necessary' means being essential, indispensable, or requisite. In no sense does it mean merely being useful or convenient. 'Useful' and 'convenient' convey those ideas, 'necessary' does not. In no way is the chartering of a powerful banking corporation necessary to enable Congress to execute its enumerated powers.

Even if it were, for the sake of argument, the Court completely ignores the "proper" part of the Necessary and Proper clause. 'Proper' means "suitable,' but it also means "conforming to established standards." The "established standards" here would be the Constitution. Even if something is necessary, it is not proper if it violates something else explicitly stated in the Constitution. What it violates is the Coinage clause of Article I, Section 8, which states that Congress has the power "to coin money" and to "regulate the value thereof." In effect the Court's interpretation in its majority opinion completely ignores this clause and instead allows the enumerated power to be granted to an external corporation. Thus, it is perfectly clear that Congress (and the rest of the federal government) does not have the enumerated power to charter a bank, that this power is not necessary and proper for exercise of its enumerated powers, and therefore, the federal government simply cannot do it.

Therefore, the Federal Reserve is patently unconstitutional. If its proponents wish to make it constitutional, they simply need to amend the Constitution. But why in the world would we want to amend the Constitution to allow such a monstrous beast to be constitutional? The Federal Reserve creates economic crises such as the Great Depression and the current economic collapse. The Federal Reserve also debases the currency over time, impoverishing all Americans through the "inflation tax." As Texas Congressman Dr. Ron Paul has noted, the Federal Reserve, through its shenanigans, has reduced the purchasing power of the American dollar ninety-five percent over the last century, essentially stealing $.95 of each dollar. More alarmingly, the Federal Reserve allows the federal government to almost clandestinely fund its freedom stealing welfare/warfare state. Without the machinations of the Federal Reserve, such things as the Patriot Act and the overseas American Empire with its unconstitutional wars of aggression would need to be funded by increasing income taxes. However, the Federal Reserve allows it to be funded by simply "printing money." But worst of all, this printing of money by the Federal Reserve is only pushing the day of reckoning forward. One day it will no longer have another economic bubble to create ,and all the low interest rates in the world will not be able to prevent the nation from collapsing under its $16 trillion dollar (and growing) debt. What is left of the value of the dollar will disappear, and the republic will be in ruins. The American people must recognize this unconstitutional demon for what it is, and exorcise it before it is too late.