The shortcomings and grave danger of an unchecked central bank, the Federal Reserve. The argument needs to be repeated in every discussion of public policy. all talk about the dangers of big government and loss of liberty is inadequate if the negative impact of the money managers is not addressed. Avoiding the subject, deliberately or not, serves the interest of those who support the expanding government welfare and promotes an indirect way to pay for unpopular and unjust wars.

The problem is easily summarized. Money was once rooted in a scarce commodity like gold or silver. It could not be manufactured by governments. in the late 18th and 19th centuries, there were many debates about the first and second Bank of the United States.

1913 Congress created the Federal Reserve with the power to print new money. This allowed government to pay for wars and welfares, but it also generated economic instability with booms and busts. Each time we’ve gone through this, the government and the Fed removed more of money’s commodity backing.

Since 1971, the dollar is not redeemable in anything but itself. It’s nothing but a symbol and there are no limits on the number of dollars government and the Fed can create. The result has been an unchecked expansion of the state and a brutal and long inflation that has reduced our living standards in deceptive ways.

Until just a few years ago, the number of Americans who understood the dangers of this policy of monetary destruction was quite small. most Americans, because of what they had been taught for decades, believe the Federal Reserve provides the ultimate safety net for everyone concerned: bankers, Wall Street, investors, businesses, employees, consumers, et al. most believe that the Fed gets us out of jams such as too much inflation, recessions, or too high interest rates.

Alan Greenspan was called the Maestro and was heralded as the genius who had a magic touch and could fine-tune the economy in a new economic era. The fact that the Fed was set up to be the lender of last resort, along with easy credit granted by the Fed, encouraged huge malinvestment and excessive debt. The gargantuan size of the derivatives market—a crisis not yet resolved—could not have occurred without a Federal Reserve and the moral hazard its policies generate. The Fed should have been blamed for most of our economic problems rather than credited with providing solutions to them.

Legislation and regulations added fuel to the fires of speculative excesses, especially in home mortgage derivatives. Keynesians encouraged everyone to trust the safety net of government spending and Federal Reserve easy credit. This misplaced trust, based on false assumptions, has generated, in my estimation, the largest financial bubble in all of history.

The Fed has, in the past, been able to take credit for the good times and for pulling us out of the bad times. but no longer will it remain exempt from blame. The monetary system guarantees that investors and banks will push the envelope and make careless speculative decisions that generate a bubble economy waiting to burst.

I’m sure the historians one day will express great amazement as to some of the silly notions that were accepted as being sound for so many years, before the current collapse occurred. What sane person would advise a family member or a friend who was in over his head financially, in debt, and about to lose his home that the solution was to borrow more money and spend it and sign up for as many new credit cards as possible? It is ludicrous. in addition, he is told that it is not necessary to work overtime or take a second job to reduce his debt.

And yet that’s exactly what our nation has been doing—in spades—since the crisis hit in 2008. and the Keynesians are still surprised and annoyed that the economy has not recovered. their answer continues to be spend more, borrow more, and increase the debt even faster. It’s hard to believe that reasonable people believe this. An individual is not better off by assuming more debt and spending more, so how can a nation expect to be?

Keynesians have lost the intellectual debate. After the total failure of the most militant forms of economic planning—fascism and communism—the worldwide failure of Keynesian-type central economic planning is staring us in the face.

They have but one card left to play: the argument that anyone who doesn’t go along with their bailout programs, which are nothing more than rehashes of the programs that created the crisis, doesn’t care about people and is devoid of all compassion. Instead of debating the underlying economic policies, they resort to demagoguing the issue with innuendoes and false charges regarding compassion.

Keynesians and their political cronies in Washington are quick to accuse anyone who opposes unlimited unemployment benefits as heartless.

The question they won’t even consider is what would they do if it were shown that extracting funds from the productive economy to subsidize unemployment results in prolonging the unemployment and actually increases the number of jobs lost? As funds are drained away from those who are barely hanging on and trying to expand their businesses, the economy is made weaker.

Those who refuse to engage in the intellectual debate and look at the consequences of ideas and policies resort to politicizing the issue with offers of transfer programs based on increased taxation and inflation in order to maintain power. if a reversal of this process is not achieved, total bankruptcy will force us to consider an entirely new system.

I would like to see a dollar as good as gold. I would like to see the banking system operating as it would under free enterprise, meaning no central bank. I would like to see competitive currencies emerge on the market and be permitted to thrive. I’ve been pushing for these solutions for decades. The problem of the transition is not technical. It can happen. The problem is political. Paper money is a drug and Washington is addicted.

What, then, is a realistic solution?

As Hayek used to say, we need choice in currency. Washington should get out of the way and let another system built on human choice emerge spontaneously. That would require an end to the crackdown on competitive currencies. I’m fully confident that we would see the dollar outcompeted in time.