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100 Years Ago: Why Bankers Created the Fed :: The Circle Bastiat

100 Years Ago: Why Bankers Created the Fed :: The Circle Bastiat.

Christopher Westley writes in today’s Mises Daily, on the Fed’s 100th birthday:

The boom and bust cycle, explained by the Austrian School in such detail, became worse and worse in the period leading up to 1913. And with the rise of Progressive Era spending on war and welfare, and with the pressure on banks to inflate to finance this activity, the boom and bust cycles worsened even more. If there was one saving grace about this period it would be that banks were forced to internalize their losses. When banks faced runs on their currencies, private financiers would bail them out. But this arrangement didn’t last, so when the losses grew, those financiers would secretly organize to reintroduce central banking to America, thus engineering an urgent need for a new “lender of last resort.” The result was the Federal Reserve.

This was the implicit socialization of the banking industry in the United States. People called the Federal Reserve Act the Currency Bill, because it was to create a bureaucracy that would assume the currency-creating duties of member banks.

It was like the Patriot Act, in that both were centralizing bills that were written years in advance by people who were waiting for the appropriate political environment in which to introduce them. It was like our current health care bills, in which cartelized firms in private industry wrote chunks of the legislation behind closed doors long before they were introduced in Congress.


European Fascism Is Different This Time, Says the New York Times :: The Circle Bastiat

European Fascism Is Different This Time, Says the New York Times :: The Circle Bastiat.

Tuesday, November 12th, 2013

A recent New York Times article bemoans the rise of populist parties in European countries, which are stridently nativist and nationalist. In Denmark, some polls show that the Danish People’s Party is now more popular than the incumbent Social Democrats.  Likewise, a recent poll indicates that the National Front, founded by the notorious Jean-Marie Le Pen and now led by his daughter Marine Le Pen,  is the most popular party in France.  According to the article such “disruptive upstart groups” are also making inroads in Austria, Britain, Bulgaria, the Czech Republic, Finland and the Netherlands.

The article hastens to assure readers, however, that, aside from Greece and maybe Hungary,  ”The trend in Europe does not signal the return of fascist demons from the 1930s.”  Why no cause for concern?  You see  ”Europe’s populists want to strengthen, not shrink, government and see the welfare state as an integral part of their national identities.”   These parties tap into  ”a curious mix of right-wing identity politics and left-wing anxieties about the future of the welfare state.”  In making such an argument the author of the article, Andrew Higgins, demonstrates his complete innocence of any historical or doctrinal knowledge of the phenomenon of fascism.

A strong government and a welfare state was precisely what the the European fascists of the 1930s promoted in their propaganda and instituted once they achieved power.  For example, the 25-point program of Hitler’s National Socialist party, promulgated in 1920, called for an extensive  welfare state enforced by a strong central government.  Point 7 demanded “that the State shall make it its primary duty to provide a livelihood for its citizens.”  Point 11 sought “The abolition of all incomes unearned by work” and “The breaking of the slavery of interest.”  Points 13-16 demanded, respectively:  the nationalization of all  trusts; profit-sharing in all large industrial enterprises; the “extensive development” of old age insurance; and the communalizing of large department stores and the subsidization and preferential treatment of “small traders” by the State.  Point 20 demanded that the State reconstruct education “with the aim of opening up to every able and hard-working German the possibility of higher education and of thus obtaining advancement.”  It also demanded “the education of gifted children of poor parents, whatever their class or occupation, at the expense of the State.”  Point 21 would require that the State “ensure that the nation’s health standards are raised by protecting mothers and infants, by prohibiting child labor, by promoting physical strength through legislation providing for compulsory gymnastics and sports, and by the extensive support of clubs engaged in the physical training of youth.”   Last but not least, Point 25 addressed the means for putting the whole program into effect and  demanded  ”the creation of a strong central state power for the Reich; the unconditional authority of the political central Parliament over the entire Reich and its organizations.”

Nor was the National Socialist  program for a welfare state mere empty rhetoric.  In his book, Hitler’s Beneficiaries: Plunder, Racial War, and the Nazi Welfare StateGotz Aly argues that Hitler created “a racist-totalitarian welfare state” that showered munificent benefits on the lower and middle classes and on farmers.  Living standards for these groups remained elevated almost until the end of World War 2.  The Hitlerian welfare-warfare state was paid for by punitive capital gains taxes on corporations, a 50 percent surcharge on all wages (50% of which was paid by 4% of the highest wage earners), and, during the war, by the plunder of Jewish property and conquered countries.


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