Rothbard Murray Newton - The origins of the Federal Reserve

Author : Rothbard Murray Newton
Title : The origins of the Federal Reserve Selected from A history of money and banking in the United States The colonial era to World war II
Year : 2002

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The Progressive Movement. The Federal Reserve Act of December 23, 1913, was part and parcel of the wave of Progressive legislation, on local, state, and federal levels of government, that began about 1900. Progressivism was a bipartisan movement which, in the course of the fi rst two decades of the twentieth century, transformed the American economy and society from one of roughly laissez- faire to one of centralized statism. Until the 1960s, historians had established the myth that Progressivism was a virtual uprising of workers and farmers who, guided by a new generation of altruistic experts and intellectuals, surmounted fi erce big business opposition in order to curb, regulate, and control what had been a system of accelerating monopoly in the late nineteenth century. A generation of research and scholarship, however, has now exploded that myth for all parts of the American polity, and it has become all too clear that the truth is the reverse of this well-worn fable. In contrast, what actually happened was that business became increasingly competitive during the late nineteenth century, and that various big-business interests, led by the powerful fi nancial house of J.P. Morgan and Company, had tried desperately to establish successful cartels on the free market. The fi rst wave of such cartels was in the fi rst large-scale business, railroads, and in every case, the attempt to increase profi ts, by cutting sales with a quota system and thereby to raise prices or rates, collapsed quickly from internal competition within the cartel and from external competition by new competitors eager to undercut the cartel. During the 1890s, in the new fi eld of large-scale industrial corporations, big-business interests tried to establish high prices and reduced production via mergers, and again, in every case, the mergers collapsed from the winds of new competition. In both sets of cartel attempts, J.P. Morgan and Company had taken the lead, and in both sets of cases, the market, hampered though it was by high protective tariff walls, managed to nullify these attempts at voluntary cartelization. It then became clear to these big-business interests that the only way to establish a cartelized economy, an economy that would ensure their continued economic dominance and high profi ts, would be to use the powers of government to establish and maintain cartels by coercion. In other words, to transform the economy from roughly laissez-faire to centralized and coordinated statism. But how could the American people, steeped in a long tradition of fi erce opposition to governmentimposed monopoly, go along with this program? How could the public’s consent to the New Order be engineered ? ...

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Balder Ex-Libris