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What is the proper role of the Federal Government (Feds) and central bank (the Federal Reserve or "the Fed") in managing the economy?
  A strong centralization.viewpoint:  

A strong decentralization.viewpoint:
Must be major. They provide vital ex-  
Close to zero. They are typically guided
pertise and savvy central planning    
by politics, rarely by sound economics
Their cooperation with corporations  
The Feds are monopoly, the Fed a cartel
eliminates unnecessary competition  
Only an anti-cartel free market is good
We require central force to bust trusts  
Coercion undermines liberty. Systems of
  and keep markets open overseas    
voluntary exchange work better

Sample argument: The Federal Government, Federal Reserve Banking System (the "Fed"), and large corporations must work together to insure American economic prosperity. Our government-funded schools tell us why. They tell us that the Great Depression was caused by greedy businessmen who overextended themselves before the stock market crash and by people who got scared and started saving too much and who slowed down the economy. Therefore, government had to step in and stimulate spending, manipulate markets, manipulate prices, create corporate cartels, and manipulate investment through its taxation and fiscal spending policies. The "Fed" needed to provide more liquidity to banks to avoid more bank failures. We require activist, interventionist government and central bankers to insure that these problems never take place again. Government knows when to eliminate unnecessary redundancies by creating utility monopolies, special privileges, and corporate cartels, conversely, it also knows when and where to bust trusts to maintain competition. We require aggressive use of military force overseas to insure cheap access to vital resources and make sure foreigners know not to ever mess with American businesses.
. . .

Sample argument: Government officials should have absolutely minimal involvement in business, because they are almost always guided by politics and rarely by sound economics. Virtually none of them know anything about competent entrepreneurial calculation. Central planners can never adjust the economy like the price information mechanisms of free market competition. Just throwing money at economic issues rarely solves them. In the long run, the main effect of government and central bank intervention is to distort the economy and create very wasteful inefficiencies. The Fed recklessly expands money and credit in a fractional reserve system. This is divorced from grass roots entrepreneurial calculation, although it remains highly profitable for Fed insiders. Corporate cooperation with the Federal government is fascistic crony capitalism. It is the very worst and most corrupt form of protectionism, and destroys free market competition. Generally, the government is too arbitrary and politically motivated whenever it tries to either bust trusts or create cartels. The government and central bank actually crowds out private entrepreneurial infrastructure at the grass roots. In the long run, maintaining this infrastructure to create higher quality, lower cost products that people want to voluntarily buy is much better than central planning.


Strong centralization viewpoint:

The New Deal remains a holy icon to the American left alongside Saint Abraham Lincoln. It continues to be venerated in the history and economics departments at most of our colleges and universities. It created an economic mythology that became a major justification for the Great Society programs of the 1960's that put out of control government spending into hyper drive. Lastly, there are still many neo-Keynesians around who believe that war spending is good for an economy. They also believe that government rather than a free market should play a major role in keeping an economy properly fine-tuned and stimulated. .

Strong decentralization viewpoint:

In the centralization statement, I voiced a widely held "Establishment" view that "the Great Depression was caused by greedy businessmen who overextended themselves before the stock market crash and by people who got scared and started saving too much and who slowed down the economy. Therefore, government had to step in and stimulate spending, manipulate markets, manipulate prices, create corporate cartels, and manipulate investment through its taxation and fiscal spending policies."

Anarcho-libertarians such as Dr. Murray Rothbard and other "Austrian" economists portrayed at and have a completely different view. According to Dr. Murray Rothbard in his online book America's Great Depression, the privately owned Federal Reserve Banking cartel recklessly expanded money and credit between its founding in 1913 and the market crash in 1929. It doubled the money supply during World War I and doubled it again during the roaring 20's. This created enormous distortions in the economy that would inevitably have to be corrected under any economic system, much like a drunk inevitably facing a hangover.

During the correction phase, the Federal Government made matters worse by raising taxes. This stifled entrepreneurial capital formation and antagonized business owners who were the key to job creation and the rational readjustment of distorted economic sectors. The Government also artificially elevated prices of certain goods. For example, it destroyed vast amounts of agricultural goods to help raise farm prices. This not only made things more expensive for many already impoverished consumers, but also added to economic distortions rather than sorted them out. Many senior members of the FDR administration openly admired Mussolini and his concept of the "corporatist state" that promoted cooperation between corporations and also between themselves and the government. They spoke about eliminating "unnecessary competition." This did even more to frighten entrepreneurial businessmen away from rehiring workers and added even more to economic distortion. From the libertarian perspective, there is rarely such a thing as too much competition, but there is definitely evil in any form of monopoly power, to include government orchestrated cartels designed to eliminate "unnecessary competition."

In the Austrian economic view, World War II itself did not really end the Great Depression, but rather masked many of its symptoms by regimenting around 16 million Americans in the Armed Forces and running a command economy to produce war goods. From a purely economic viewpoint, this is similar to large scale "Sovietization" and "make work" employment.

Even if for the sake of argument World War II did somehow "end" the Great Depression, most sane individuals would agree that incurring 407,000 military deaths, handing Eastern Europe over to communism, and placing everyone on rationing is a pretty crummy way to try to solve domestic economic problems.

In addition I must note that World War II was a catastrophe for white genetic interests on many different levels, from the physical to the cultural levels. I could write volumes on this topic alone, but suffice to say here that the Federal Government took another quantum jump towards centralization, and coopted itself with Jewish-controlled Hollywood in promulgating a vicious propaganda battle against all forms of white nationalism that persists to this day. The fact that today white Americans are so pathetically disorganized in resisting tidal waves of illegal immigrants from Mexico, or that they passively allow someone such as Ernst Zundel to be deported from America to Germany and sentenced to five years in prison for daring to question aspects of court histories of the Holocaust, or the fact that the Jewish American NATO commander Gen Wesley Clark would comment "There is no place in modern Europe for ethnically pure states" --all of this suggests to me that the World War II Allied propaganda battle continues to do its damage to this very day. Interestingly enough, the first time I began to feel this way was in the mid 1980's when I first watched "World War II: The Propaganda Battle" on PBS by Bill Moyers, where he interviewed Axis moviemaker Fritz Hipler and also Frank Capra who produced the famous Allied Why We Fight series.

Apart from this digression about the horrific impact of World War II, there another gigantic irony involved here from the Austrian perspective. In a perverse way, World War II may have "ended" the Great Depression by distracting the U.S. Government away from trying to directly cure the economy with policies that favored price supports, market manipulation, hostile rhetoric towards business, and other self-defeating policies. While turning its focus towards fighting a war overseas, it permitted a stealth free market correction to take place in wages and bloated asset prices that corrected these things downward. This set the stage for a recovery. However, according to Austrian economists the Great Depression was barely over by 1945, sixteen years after the 1929 market crash.

In contrast to the disastrous New Deal era, libertarians like to cite the Martin Van Buren administration as a model case where they believe laissez faire policies worked best. At the inception of Van Buren's administration (1837-1841) came the Panic of 1837. Libertarians claim that for all practical purposes, Van Buren's administration simply stepped back and let the free market to take its course. Within two years, the free market sorted the economy out and a strong economic recovery began. Austrians view falling asset prices and falling wages as part of a necessary process albeit painful process an economy needs to go through in order to cleanse itself of its distortions.

Austrian economists believe that if the Herbert Hoover and FDR administrations had followed similar policies to Van Buren, the recession following the 1929 stock market crash would have never turned a major recession into a Great Depression, nor would it have lasted more than a few years. Some good libertarian sources to explain this viewpoint are Dr. Robert Higgs of the Independence Institute, Dr. Thomas Woods, Jr (author of The Politically Incorrect Guide to American History), and Dr. Thomas DiLorenzo (author of How Capitalism Saved America).

But to get to the real roots of the problem, libertarians such as Dr. Murray Rothbard believed that we must get rid of the Federal Reserve Banking System entirely and go back to a free market hard money system linked to gold and silver. This takes money creation power out of the hands of politicians and central bankers so that they can no longer work their mischief. All considered, this general approach worked well in America during many prolonged periods of the 18th and 19th centuries. In addition, Dr. Rothbard felt that we need to get rid of a fractional reserve banking system, and require 100% back up of deposits. I recommend that readers visit and and read the works of Rothbard and other libertarians that explain their rationale for this position. All of this is well worth delving into, only I do not think it is appropriate for me to try to do it here. At my audio archive I provide links to the Mises Institute video Money, Banking, and the Federal Reserve, as well as links to the excellent series The Money Masters, Part 1 and Part 2.
As another important aside, unfortunately in America today we have a terrible economic mess where real American wages have suffered various types of declines for two very different reasons, and where the solutions to the two different causes involve two very different remedies.

The first reason for why real American wages have stagnated since the 1970's is that America has lost 70% of its manufacturing base. I agree with Eumonn Fingleton's position in In Praise of Hard Industries that manufacturing is the bedrock of real jobs in a real economy and must be maintained at about one third of GDP. America has allowed its base to fall below 12%. There are many causes to this problem, but certainly a very important dimension has an ideological and moral basis to it. Most American CEO's today simply do not care that they neglect white Americans workers and instead prefer to reinvest in foreign low cost labor and foreign industrial infrastructure to make quicker near term profits. However, in the long run they fail to adequately reinvest in American industrial infrastructure and advance the skills and wages of American workers. Over the long run they kill the white middle class golden goose that laid the original golden eggs of the industrial revolution. This is a very serious issue, and is not one where we can afford to passively watch wages continue to decline. Nor can we afford to passively watch some kind of self-styled "global free market" go about totally liquidating the last of our industrial base and our structural ability to export competitive tradable goods that foreigners voluntarily want to buy.

Then there is a separate issue where wages might fall as part of a free market correction process after massive government spending and reckless central bank credit and monetary expansion has severely distorted the economy, and an inevitable correction sets in much like the hangover an alcoholic experiences when he finally runs out of booze. Here, a libertarian economist might want to have the government stand back and passively allow the free market to correct wages and bloated asset prices. He would argue that this process must inevitably take place anyway for the economy to rationally readjust itself, so the sooner you hold fire sales and purge out the mal investments and other nonproductive assets, the better.

However, humanitarians might argue that even here we need some kind of intervention to prevent laid off workers from starving to death. A number of patriots might also argue that we also need to round up and punish the bankers and government politicos whose reckless policies created the distortions to begin with, except unfortunately this never seems to happen. Why should all the "hangover" from economic distortion promulgated by insiders to enrich themselves have to get dumped on American workers alone?

Speaking of publicly identifying the real malefactors, many populist and paleo-conservative political leaders and commentators during the Great Depression such as Huey Long, Elizabeth Dilling, Ralph Townsend, Henry Ford, and Father Charles Coughlin charged that the FDR administration was heavily infested with Jewish communist advisors and that FDR was protecting international Jewish bankers and other elitists who helped set up the privately owned Federal Reserve system. The trial of Alger Hiss, the Venona papers, and other sources have proven the truth of most of what they said.

Incidentally, FDR did not take kindly to the heat that he got from the America First Committee and other traditional American conservative groups. Early in the war, he denied U.S. mail access to Father Coughlin's Social Justice magazine following his criticism of the American defeat in the Philippines. Ralph Townsend, the author of Ways That Are Dark (carried by America First Books), got dragged by FDR before a "Great Sedition Trial" along with other prominent rightists of the period such as Laurence Dennis and Elizabeth Dilling. Please see my Preface to Townsend's book for more about this trial.

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