Congressman Massie Proposes to Abolish the Federal Reserve: That’s Insufficient to Restore American Economic Sovereignty
On May 16, 2024, Congressman Thomas Massie introduced into the House of Representatives the ‘‘Federal Reserve Board Abolition Act” (H.R. 8421), legislation aimed at abolishing not only the Board of Governors of the Federal Reserve but the Federal Reserve itself, along with all its branches. As of this writing, the bill has 20 co-sponsors, almost all of whom are members of the “Freedom Caucus” in the House of Representatives.
It is certainly a welcome sight. Elected officials, for the first time in a long time, are publicly attacking the financial racketeering of our current Federal Reserve system. Massie’s H.R. 8421, available for scrutiny here, does indeed abolish the Federal Reserve and return all of its assets to the U.S. Treasury, restoring at least a semblance of Constitutional control over our nation’s currency. In a statement released by Massie in conjunction with the filing of his legislation, he states:
“The Federal Reserve created trillions of dollars out of thin air and loaned it to the Treasury Department to enable unprecedented deficit spending. By monetizing the debt, the Federal Reserve devalued the dollar and enabled free money policies that caused the high inflation we see today. Monetizing debt is a closely coordinated effort between the White House, Federal Reserve, Treasury Department, Congress, Big Banks, and Wall Street.”
AVOIDING THE REAL ISSUE
Massie’s indictment of the FED, cited above, is completely true. BUT, and it’s a very big BUT what Massie and his co-sponsors are proposing fails completely to address the financial cancer which has destroyed our productive economy over the last four decades. And they also fail to propose any positive strategy as to how we proceed to rebuild that productive economy.
In the hyper-deregulated financial markets which have emerged since the abolition of the Bretton Woods System in 1971, greatly worsened by Acts of Congress in the 1990s (e.g., the Gramm-Leach-Bliley Act), what the financial oligarchy has achieved is a total transformation of our “banking” and other financial institutions into a gigantic engine of financial speculation. Today, so-called “shadow baking,” hedge funds, asset manager, wealth funds, off-shore accounts, “derivatives markets” and other “non-banking” institutions, together with the major too-big-to-fail banks, engage in 24 hour-per-day practices to maximize monetary profit for the financial elites, regardless of the consequences for the productive economy and the American people. These powerful financial interests have de facto hijacked our Government’s Constitutional mandate to establish a sovereign system of Public Credit and substituted a system of self-serving monetary gambling. There is no actual National Economic Sovereignty where gamblers, thieves and grifters control our “money system.”
Simply abolishing the Federal Reserve does not cure this problem. In fact, it might make it worse, since without the Fed there will not even be a fig-leaf of supervision over the practices of these financial institutions.
It is certainly the case that the Federal Reserve, as a private Central Bank, is unconstitutional, and the current practice of the Fed monetizing U.S. debt must be ended at once. However, this must not be confused with the Constitutional power of the government to issue legal tender currency and generate Credit for the Public Good. The problem here—the Real Problem—is not the quantity of sovereign currency which is emitted but WHAT IS DONE with that currency. If it is used to feed a cancerous speculative bubble, it will have deadly consequences. If, on the other hand, it is extended in the form of credit to sponsor productive activity—be it infrastructure, manufacturing, mining, agriculture, or similar ventures—then the effect is not only beneficial to the People, it is non-inflationary!
This is the Real Issue which Massie and his co-sponsors do not address: WHAT ARE WE DOING WITH THE MONEY WE PRINT? This is the second and even bigger problem with the legislation proposed by Massie. He completely fails to identify how we can guarantee a flow of credit into rebuilding our productive economy.
One of the likely reasons for the shortcomings of the Massie Proposal, is that the origins of this legislation seem to have come from within the Freedom Caucus. Despite some praiseworthy actions taken by members of that Caucus, many of its members should be ashamed of themselves for embracing the ravings of the “Austrian School” of economics, the radical ANTI-AMERICAN precepts of 19th century British imperial “free trade” economics and finance. This is very notable in Massie’s references to the libertarian Ron Paul as the “originator” of the fight to rein in the Fed, without ever mentioning that during the 1960s, 70s, 80s and 90s two Democratic Congressmen, Wright Patman and Henry Gonzales, introduced legislation to abolish the Federal Reserve more than 50 times! Going back even further, in the 1930s the Republican Congressman Louis McFadden introduced legislation to impeach the entirety of the Board of Governors of the Fed, stating:
“The Federal Reserve Banks are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers. . .”
LaRouche fought for the Policy of Hamilton and Lincoln
The paramount issue facing our nation today is to give hope to our beleaguered citizens, to create a better future by rebuilding our productive economy. This is the POSITIVE, as opposed to a merely negative, goal that must direct our efforts. Long before Ron Paul, Lyndon LaRouche authored a proposal to abolish the Federal Reserve, but LaRouche went further, specifying what is required to create an economic renaissance in America. He first specified “Initial Steps”:
1. Restore Glass-Steagall. End ALL financial speculation in the banking system.
2. Abolish the independence of the Federal Reserve and make it a subsidiary agency within the U.S. Treasury. The Federal Reserve will be re-constituted, within the Treasury Department, as a National Bank, with its SOLE function being as a transfer agent of Constitutional U.S. Treasury Notes into the regulated private banking system
3. Abolish both the Open Market Committee and the Discount Window, where U.S. government debt is unconstitutionally monetized,
4. Outlaw all over-the-counter trading of financial derivatives. Ultimately, repeal all the various legislation from the 1990s which legalized financial gambling.
These are merely the initial steps. But we must begin by throwing off the “pro-speculation” mindset of the last 30 to 40 years. Nothing useful can be accomplished unless we take that first step.
The goal is to return to a system of state-created Credit, as was done by Abraham Lincoln through his Greenback initiative. What must be created is this: —Constitutional money (U.S. Notes), authorized by an act of Congress, issued by the U.S. Treasury, and directed by a National Banking facility into a regulated private national banking system for the purpose of productive economic investment. This approach worked under Hamilton, and it worked under Lincoln. This is an American—not Austrian or British—policy.
Financial gambling is worthless and ultimately destructive. We must rebuild our PRODUCTIVE ECONOMY. Members of Congress should keep their eyes—and intention—on this goal. The issue is not “ideological purity,” it is Making America a Productive Powerhouse once again.
This reporter is the author of “National Banking,” available here.
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