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The Founding of the Federal Reserve

Last week we spent a lot of time talking about the Federal Reserve, specifically the recent US Treasury-sponsored blueprint that would expand the Fed's regulatory powers and grant the central bank an official mandate to "stabilize markets".

In all the discussion over this recently-proposed framework, I hear very little mention of the fact that a privately-owned, or quasi-public, central bank (the Federal Reserve) is now being cast as a US regulatory agency.

With last week's proposal to reshape the Fed's role with increased oversight of the financial markets, the Federal Reserve is now seen as a lender of last resort to non-bank financial institutions, a regulator of financial markets, and a market stabilizing agent.

Just how did this amazing transformation take place?

To answer that question, I think we first need to look at how and why the Federal Reserve system came about in the first place.



To shed some more light on this topic, here is a video clip of Austrian economist Murray Rothbard giving a 1984 presentation entitled, "The Founding of the Federal Reserve".

There is much to hear in this presentation clip, but one of Rothbard's early main points is that our current central banking system was born out of a desire to cartelize the banking industry and allow for the creation of an ever-expanding (or, "elastic") money supply.

Now, most people would tell you that this is a good thing, as this is the message that most of us absorbed through the media, or were taught in school.

But, as with nearly everything learned in schools (or absorbed through the cloud of "conventional wisdom"), there is another, often overlooked, side of the debate.

I'll let Rothbard do the rest of the talking. I hope you'll find this material interesting and informative, and share it with others who might find it useful as well.

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