Will the Fed be terminated?

Written by: PETER ST ONGE Compiled by: Block unicorn

The most important lesson of the Second Bank of the United States is that the Federal Reserve can be terminated.

There are a total of 4 central banks in the US, 3 of which are closed and 1 is still operating. The last central bank we closed was Andrew Jackson’s Second Bank of the United States in 1836, which gave us a road map to ending the Federal Reserve.

Second Bank of the United States

**The Second Bank was founded in 1816. Like all central banks, it aims to finance government debt at the expense of issuing counterfeit currency. **

Buying government debt is standard practice for central banks: it’s a bribe they pay governments for a license to counterfeit currency. They use the counterfeit money to buy Treasury bonds at low interest rates, allowing the government to deficit spend cheaply.

**Governments usually pass legal tender bills that stipulate that ordinary people must use these counterfeit bills, otherwise the entire system will collapse: the government will be left with a pile of waste paper that cannot be spent. **

In addition to profits for central bank sponsors, large amounts of counterfeit money are popular with politicians because it triggers a short-term economic boom: Counterfeit money dramatically increases real savings and makes borrowing cheap.

Cheap loans sparked an artificial boom, a frenzy of hiring, building and investing. It’s like cocaine to politicians who credit themselves with an organizational flame exuberance that burns brightly but for a short time.

**But it will eventually end in a recession or depression. At this point, governments will scapegoat the market—the “animal spirits” of those mysterious Keynesian “collective hallucinations.” Or they will lay the blame on an external crisis, such as a war, or a financial collapse caused by an overextended boom, caused by the recession itself. **

So, here’s the central bank package: empowered counterfeiters to provide governments with cheap money, and a short-lived boom that’s best ended after the elections.

Establishment of the Second Bank of the United States

Back in 1816, money printing during the War of 1812 caused regional banks to refuse gold for their paper money, the bank’s version of a default.

Remember, at that time one dollar actually represented gold—about 1/20 of an ounce. So refusing to exchange it in kind (gold and silver coins) is tantamount to bankruptcy. Like a pawn shop refusing to return your guitar.

**The banks wanted a bailout, and the central bank—the Second Bank of the United States—was their tool. **

Established by Congress, the Second Bank would hold the federal government’s deposits and process its payments—so it would act as a normal bank for the federal government. What’s more, the Second Bank will help market government debt.

In return, the Second Bank was allowed to print paper money and make loans, much like fiat reserve banks do today: they pretended to have a million dollars and then drafted an IOU for the borrower in exchange for a promise to pay the million dollars plus interest. . That IOU — the paper money — legally has the disposable character of legal tender, and thanks to legal tender laws, it is illegal to refuse to accept legal tender.

Unlike the Federal Reserve today, the Second Bank does not set interest rates. But currency counterfeiting drove down interest rates, leading to a brief but violent boom that ended in the Panic of 1819, one of the worst recessions in U.S. history.

By the way, Murray Rothbard once wrote an entire book about this crash—in fact, it was his Ph.D. dissertation.

Public Antipathy to Banks

In 1819, the public blamed the Second Bank for causing the collapse. But the printing press can buy a lot of friends, so the banks still have support in Congress.

As a result, banks triggered panics in succession, including 1822 and 1825, every three years.

The events sparked public outrage and led Jackson, a fiery populist, to make bank abolition a focus of his campaign.

Jackson was the Donald Trump of his time — despised by the establishment, and he resented it. He was a war hero who despised the elite. In fact, Donald Trump has a bust of Jackson prominently displayed in the Oval Office.

Jackson himself hated paper money, as he once nearly went bankrupt accepting paper money that had become worthless. He believed that only gold and silver were real money. Additionally, Jackson expressed sympathy for states’ rights, which he believed were trampled upon by the federal bank.

Jackson Abolishes Second Bank

Jackson was elected in 1828, but the bank’s charter did not expire until 1836, and he began preparations to withdraw federal deposits from the Second Bank.

The Second Bank fought back by halting lending at state banks, hoping to trigger a bank collapse—a “panic” that would be blamed on Jackson.

However, the move backfired and the public became more dissatisfied with Second Bank. They see him as a plutocratic manipulator, which is exactly what it is.

Faced with this outrage, the House failed to renew the Second Bank’s charter in 1834, closing it.

What happened next? Jackson stepped up land sales and paid off the federal debt for the first and only time in U.S. history.

Initially, these sales were made with paper money, which the state banks continued to issue, taking over from the Second Bank’s printing of money. This sparked a land speculation boom, which Jackson countered with the Bullion Order of 1836, requiring land purchases to be paid for in gold or silver.

This finally put an end to inflationary banks: the end of cheap money bankrupted nearly half of all banks in the United States—about 400 in total.

The vast majority were new “wildcat” state banks founded to profit from the land craze. But even major New York banks stopped cashing out gold and silver, effectively declaring bankruptcy.

From Second National Bank to Federal Reserve

Now, the United States has all the ingredients to return to a healthy currency. The Second National Bank had been closed, the speculative banks had been liquidated, and the national debt had even been repaid.

If, at that point, the government does nothing, the surviving conservative bankers will replace the speculators. We’ll have a sound banking system, a solid dollar, and an end to boom-bust cycles of inflation and bust.

Unfortunately, by that time, Andrew Jackson had left office. The political friends in the government are back, and President Van Buren is allowing the banks to operate with gold and silver encashments stopped, which amounts to a bank bailout, similar to the bank bailouts of the 1800s.

This continued for another 40 years, with boom-bust cycles. More often than not, the railroads played the extravagance bubble, while Lincoln sparked true hyperinflation.

Those who insisted on hard currency views won a victory during this period, returning the country to the gold standard in 1879, ushering in the most glorious golden age in American history and even in world history. By the way, my article about that golden era is here .

However, this golden age only lasted until 1907. When a group of banks tried to manipulate the copper market, it failed, triggering one of the nation’s largest banking collapses. This collapse was almost single-handedly saved by Morgan, the largest oligarch in the United States.

The bailout cost Morgan a lot of money, so he and other bankers immediately institutionalized the bailout and passed the costs on to the public. Eventually, the Second National Bank was revived, now Orwellianly named “The Federal Reserve.” The name was carefully chosen to evoke safety and trust in the banking bailout mechanism, effectively resurrecting the dirty bank bailout machine.

Thus, the Federal Reserve, the creature from Jackal Island (the author likens it to a creature to emphasize its impact on the U.S. financial system and the context of its emergence), was born.

in conclusion

For me, the most important lesson of the second bank is that we absolutely can End the Fed. This has happened three times and will likely continue.

But the key is educating ordinary people—voters—to understand what the Fed really does, and what all central banks do.

Help them understand that inflation, recession, and even bank collapse are not caused by so-called “animal spirits.” They are not greedy workers or even private sector failures in the market that require the wise hand of government to intervene. They are the creature of the Fed, its vocation, and the reason for its existence.