Lew Rockwell

The Central Bank and Its Corpses


Lew Rockwell discusses his recent talk at the Future of Freedom Foundation conference about modern wars’ dependence on inflation by the Federal Reserve, how the Fed fueled WWI to help the Morgan empire, why governments prefer to debase a currency rather than tax or borrow, how the Fed not only inflates the currency but redistributes wealth from the poor to the politically-connected rich, creates the booms and busts of the business cycle, and makes the warfare state possible, the government’s corruption of language to hide it’s crimes, importance of Austrian economic thought and how all acts committed by the state would be crimes if carried out by regular citizens.

MP3 here. (44:04)

YouTube here.

Lew Rockwell is the founder and President of the Ludwig von Mises Institute in Auburn, Alabama, Vice President of the Center for Libertarian Studies in Burlingame, California, and publisher of the political Web site LewRockwell.com. He served as Ron Paul’s congressional chief of staff between 1978 and 1982.

18 thoughts on “Lew Rockwell”

  1. people who get the money first also buy things quickly with intrisit value things like land and other assets.

    Like Ron Paul said, the price of gas in gold has remained the same but in dollar it has tripled. Gas prices are not because of peak oil or consumption or OPEC etc. Production is at a all time high (just read a Newsweek art about that) the reason gas prices are high is because it is a foreign good and the dollar is falling. In real number the US is facing hyper inflation of 11%.

    Welcome to the USSA.

  2. Yeah, you need to make Rockwell interviews a weekly fixture. The man is absolutely brilliant, and has a great radio presence to boot.

  3. It was a great interview. I’m 95% on board with libertarianism, and very much on board with classical anarchism. The one problem with modern American libertarianism is that libertarians have no answer for what to do with people who fall through the cracks, no answer as to what to do with the man who, for whatever reason, is starving in the streets. Yes, I know, *theoretically* in a libertarian society, the churches and private charities and the man’s relatives would be so overflowing with wealth that this wouldn’t happen, and it’s a pleasing theory, but it has never actually worked out this way.

    Unfortunately, for all of its virtues, libertarian freedom includes the freedom to starve if the market has no use for you.

    Rather than argue the ethics of theft to satisfy basic needs, I will propose that there is a solution palatable to both right and left wing libertarians, and this is to fund social programs (yes, a welfare state) by nationalizing the banking system (yes, nationalizing) and funding social programs through the proceeds that currently go to bankers.

    This solution is NOT coercive, as it simply repeals bank’s special privilege of creating money (something you and I would properly be jailed for). If you truly understand what money is and how it is created, you will also understand that the same process that currently makes banks rich could equally be used to fund social programs, without taxing anyone OR causing inflation, if the social programs do not cost more than net value of new goods and services added to the economy.

    Please, someone tell me that you follow me here.

  4. Ben, there are so many errors in your note that I scarcely know where to begin. Maybe it would help to know that it’s a red herring to imply that libertarianism theory has never worked, when in fact it has never been applied. We came close in early America, and it must be pointed out that there is not a single documented case of an American starving in that era. In any case, you have no way to prove your assertion based on the historical record.

    And your “solution” to money creation IS, of course, coercive, because someone is going to force those banks to turn over the money they supposedly created, and hand it over to the welfare recipients. (Can’t you see that the banks would quickly stop creating money under that scenario, unless they had a gun to their heads?).

    In fact, if genuinely private banks, as opposed to the cartel created by the Federal Reserve Act, were allowed to issue certificates fully backed by gold or silver, they would not be “creating” money at all; the money is the precious metal, which can’t be created or destroyed. Inflation would be a thing of the past, and prosperity would return to and exceed the levels of the 19th Century, when the value of the dollar remained constant for most of the century, and there were NO social programs to rob the productive and place the rest into permanent dependency.

    I “follow you”, Ben, but when you reach the cliff’s edge you’re going over by yourself.

  5. “There is not a single documented case of an American starving in that era”

    That’s just a bit ridiculous.

    “And your “solution” to money creation IS, of course, coercive, because someone is going to force those banks to turn over the money they supposedly created, and hand it over to the welfare recipients. (Can’t you see that the banks would quickly stop creating money under that scenario, unless they had a gun to their heads?).”

    I suppose that if you think that BANKS have rights, then it is coercive. However, BANKS do not in fact have “heads” to put guns to, only people and other animals have heads, and I would argue that only PEOPLE in fact have rights. Of course, banker people have rights to, but question is whether they have special rights that other people do not. I would argue that the do not: that if I am not permitted to loan out $1000 when I only actually have $100, then niether should a bank be. That’s called EQUAL RIGHTS under the law, which is a perfectly libertarian concept.

    And actually, you can have inflation even with a 100% gold-backed currency; here’s how:

    If a bank has $100 dollars in gold bars in the vault, that bank is legally permitted to print $1000 in gold certificates, thanks to something known as “fractional reserve banking,” which is an hallucinogenic concept that has been going on since the Knights Templar invented banking. Of course, only $100 of those certificates actually exist while the other $900 are created, out of thin air as it were, and this is with a 100% gold-backed currency. This is how inflation can happen even if a currency is backed by metals (metal backing does, however, limit the possible rate of inflation).

    I graduated from a good university with good grades in several economic classes without understanding that money is created by banks, period, and it’s a carefully hidden open secret. I think the documentary “The Money Masters,” which can be found on Google Video, explains it well.


  6. “Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.”
    ~ Sir Josiah Stamp – Director of the Bank of England (appointed 1928)
    Reputed to be the 2nd wealthiest man in England at that time.

    “If people only understood the rank injustice of the money and banking system, there would be a revolution by morning.” ~ President, Andrew Jackson

    “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” ~ Lord Acton

    more banking quotes:

  7. "Who precisely do you think will run you proposed national bank?"

    Here's one way it could work: pass a law abolishing ALL banks, ALL private creation of money. Calculate the amount of money that is currently created by the private banking system. Divide by the number of citizens, and distribute on an equal basis. Or, half could go directly to citizens and half could go to funding government programs without taxes. Such things could be debated in Congress, inflation rates could be set via national plebiscite. Such a system could be phased in by gradually raising the Fractional Reserve Rate.

    "It would just be a more extreme form of a central bank."

    There are currently NO democratic checks on our Central Bank, or on banking period, which is how the bankers like it. The proposal above (distributing new money directly to citizens on an egalitarian basis) is actually THE MOST RADICALLY DECENTRALIZED proposal you have ever read. I appreciate your fears though, and I share them.

    "If they are inflating the money"

    If new money is only created at the rate the economy grows, programs can be funded with new money WITHOUT creating inflation.

    The power to create money is CURRENTLY in private hands. Do you like that? Our problem is not the number of the banks or their concentration; the problem is that private interests create OUR money for THEIR profits.

  8. Ben,

    Your quotes are all taken out of context. Andrew Jackson was against the central bank, and certainly would have been against the even greater centralization scheme that you propose. He was against the same kind of fraudulent banking system that we have today, not against a free market in money. In all likelihood the same was true of Acton. The director of the bank of England is simply admitting that the English system which was based upon a privilege given to one bank, was unjust. But that certainly does not argue against a free market. Who precisely do you think will run you proposed national bank? How will they be prevented from using it to there own advantage and controlling the nation even more? By presidential elections? That’s a laugh. As soon as such a bank were created every power hungry private and government interest would flock to control it. It would just be a more extreme form of a central bank. And who cares if dividends are paid out for welfare. If they are inflating the money, the dividends will be simply swallowed up in the inlation and the powerful will increase their wealth and have further enslaved the rest of us through financial and monetary dependency. If we created such a government money machine it would be run by the likes of Bernanke. He would be its Secretary. And even more people would start worshipping each Money Secretary since the position would be more powerful. The government already pretends to godlikeness. Such a system would just add a couple more phony halos and an extra pair vulture wings made to look like those of the angels.

  9. Here is a European example: Private charity organizations in the UK worked very well, especially in healthcare services. Then the government created the NHS… :
    -This destroyed those effective charity organizations
    – is now in deficit
    – provides a mediocre service (MRSA superbug, anyone?)

    So I am inclined to agree that private charity organizations are probably more efficient than any bureaucratic government.

    Another comment: In the bible, the tax collector is always the sinner…

  10. Many countries have a ‘nationalized’ central bank. In Canada, the heads of the Bank of Canada report to the Minister of Finance (a member of parliament appointed by the prime minister to that position) and all net revenues go to the Receiver General of Canada. In the US, the profits of the Federal Reserve go to bankers and shareholders.

  11. Ben,

    You wrote that under a gold backed currency you can have inflation because of fractional reserve banking. Wrong, real libertarians are against fractional reserve banking because it is fraudulent. This is where many people who are not libertarians but have libertarian leanings go wrong. You have to first understand what REAL libertarians believe in, in order to be sure your assumptions are right. So again, your statement was 100% wrong, yet I,m betting you will not admit you were wrong.

    A mistake I see over and over again is assuming that in a libertarian society such and such could happen, and this is a weakness of libertarianism, when in fact there is an answer to that because libertarianism believes 100% in the non aggression principle, and would not allow ANY unjust laws to stand.

    Well you may say what about people starving because they can’t make it on the free market. Well first of all taking money from some people at the point of a gun – that is what taxation amounts to – to give to other people is immoral. Secondly, it is not even needed, private charity would greatly increase if people were not taxed, which is exactly what happened in america before people were taxed. What you have to understand is that we live in a world of scarcity, and from a practical point of view, ALL systems will have some poor people, and although this is often because of some mental or physical handicaps, it also happens because of plain laziness and choice. Third, under a free market system, society would prosper much more than I think you understand, so much so that this would make poverty and starvation far less prevalent. The free market is a long term solution to poverty, and it would come about much faster than you think. Also our welfare system has been a failure, there are just as many poor people today as there ever was if not more. Many of these welfare cases are discouraged from looking for a job because they would actually start out making less at a job than what they make from welfare. So you trust a system that has been a failure over one that has not been given a chance to show that it can help out those less fortunate. Don’t make the assumption that you know that lots of people starved in 19 century america, it may have been far less prevalent than in other countries, mostly because even back then america was better off than most countries, hint hint.

  12. Ben,

    You compare the private FED and a government run central bank and say that a government run central bank would work better. Perhaps, but in both systems intellectual honesty compels you to admit that in the end, with such HUGE power and wealth up for grabs, bad people WILL end up running it for their own gain. I hope your not one of these people who has not yet learned how completely corrupt our society has become and how ridicules it looks to trust in ANYBODY, government or private industry, when they are unfettered by the rule of law, and when I say the rule of law I’m talking about libertarian law, not the perversion of justice that is our current system.

    Nobody should run a central bank, because their is no reason to have one, other than to enrich those who control it. Your wrong assumption, that under a libertarian, gold backed currency system, their would still be inflation because of fractional reserve banking, ( under a true free market fractional reserve banking would be against the law because it is fraudulent ) leads you to the next wrong assumption, that therefore we might as well have a central bank.

    Their is no need for a central bank, the reason that you hardly ever hear that is because the people who control it also control the educational system and the media, and they will protect their hugely profitable and powerful secret with every thing they have. Changing the thieves to government thieves will not change a thing. Why is that so hard to understand?

  13. “under a true free market fractional reserve banking would be against the law because it is fraudulent”

    OK, so we agree on that.

    Where we differ is that you would prefer to base all currency strictly on precious metals, and either mine like heck to keep the value of currency stable, or allow it to deflate in value.

    I would agree that this would be a superior systen to the one we have now, by far, if fractional reserve banking was indeed banned.

    The only problem is that we’ve tried this before, it’s called mercantilism- things weren’t really so peachy keen back when kings used gold coins.

    Besides,if fractional reserve banking is eliminated from the economy, so with most credit. If you want entrepreneurship, for example, you have to have a source of credit available; fractional reserve banking would have to be replaced by something.

    I agree that no one should “run” a “central bank,” but imagine the following:

    A law or ammendment to the Constitution which outlaws fractional reserve banking and simultaneously orders an amount of money equal to the annual growth rate of the economy created and distributed directly to citizens on an equal basis. Or it could mandate that half of the new money could go to citizens and the other half could go to fund government, (this ratio could be determined by yearly plebiscites). Come to think of it, the total amount of funding available to the government could be determined by plebiscite as well.

    Do you have any practical objections to such a policy?

  14. Ben has a point if the poor aren’t protected in SOME way they will be exploited and there will be starvation. Read Charles Dickens Hard Times to see how that looks, hint it’s all about child labor, 12 hour work days, and disabled people begging in the streets much like you see in the Third World today when you have unregulated industry and poor social services. Private charities didn’t make up the slcak in the 19th century and would probably do even less today among todays self centered “me generation” mini mansion living yuppies.

    I genuinely appreciate Libertarians and paleo-cons opposition to empire abroad and police state at home but their economic theory is all wet. Hint Sweden has had greater economic growth than the U.S. for several years now, proof you can have innovation and a thriving economy under conditions of socialism where people aren’t allowed to fall into the cracks and education is easily available to ALL so people can upgrade their skills to compete in the global economy.

  15. Anonymous

    There is no reason to mine more gold in order to keep prices stable. Explain why in America during the 19th century we had a gold backed currency, and prices dropped steadily all through the century, amidst unprecedented growth. The idea that you have to keep prices steady has no basis, the reason you here it all the time is that almost no one is allowed to get tenure in american universities if they disagree with central banking. Mercantilism is a separate issue, and a mercantilist country would likely not have a gold and silver backed currency.

    You must have got your education at an american university, ( can’t anyone think for themselves anymore ), economic growth is fueled by real savings, not artificial money expansion, which causes malinvestment, business cycles, loss of standard of living because of inflation, etc. This is in direct opposition to what you hear on the news all the time which claims that consumer spending is the engine of growth, which is literally putting the cart before the horse.

  16. Matt

    “Sweden has had greater economic growth than the U.S. for several years now, proof you can have innovation and a thriving economy under conditions of socialism”

    The US is not even close to a free market itself, is socialist/fascist itself, and has the burden of a huge “defence” budget. Most european countries have had anemic growth for the last few decades, and it’s getting worse.

    European countries are living off their relatively more free market past, this will not last much longer, and remember I told you that. Economic law is mathematical, the truth will out. Notice you never hear of a socialist country coming out of poverty, that is reserved for relatively free market countries like Hong Kong, Singapore, Taiwan, and many more examples. How many countries in Europe in the last 20 years have had a booming economy? None. Certainly nothing close to what you see from the asian tigers. Thats not even mentioning the EU, which if it becomes a reality in europe will be a complete disaster.

  17. The real issue of the future is one that Karl Marx first pointed out:

    Corporations will increasingly not need workers, due to automated factories, computers, AI etc.

    When workers aren’t needed for the creation of REAL wealth (food, tools, machines, computers etc.) you’ll get a bloated “service” sector where the serfs “serve” those who own (stock in) the corporations (Marxists call these people “capitalists”).

    At this point, capitalism itself breaks down, as only those who own stock in corporations will in truth own anything valuable. With one ownership class and one serving class, this future will resemble high-tech corporatist feudalism.

    When the non-stock holding class is no longer useful, the non-stockholding class has two options; be starved into non-existence or revolt against the current structure of the economy and smash it.

    Sorry classical libertarians, if this were 1900 I’d be all with you, but your version of capitalism is no longer possible when the neccessities of human life can be manufactured by only a small proportion of the human population.

    We should be thinking about what an ideal economic system will be like in the future, not just what worked well in the past.

  18. Unfortunately, the moral truth of the massive case which Marx marshaled for improvement of the lot of the industrial worker was dwarfed by the magnitude of his errors.

    The three errors which Marx made were these:

    (1) His adoption of the labor theory of value which had previously been advanced by David Ricardo.

    (2) His failure to understand that the private ownership of property, including capital instruments, is indispensable to political freedom; in short, his failure to understand the menace to human freedom of the ownership of the means of production by the state.

    (3) His mistaking the wealth produced by capital for “surplus value”, i.e., value which he thought was created by labor and stolen from the laborer by the capitalist.


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