Docket II: The Money

The Federal Reserve Act · December 23, 1913

Sold to the public as the cure for banking panics — an “elastic currency” that would make crashes obsolete. The skeptics, from the Old Right to the Austrian economists who spent the next century shouting about it, said a central bank would do what central banks do: finance the state, socialize losses, and quietly tax everyone through the currency itself.

Passed two days before Christmas with half of Congress already home. That detail ages better every year.

Then what happened. Sixteen years in, the Fed presided over the worst economic catastrophe in American history — the Great Depression, which Milton Friedman and Anna Schwartz proved, in A Monetary History of the United States (1963), was a Fed policy failure, not a market failure. The institution built to prevent panics started by delivering the biggest one. And the dollar? A 1913 dollar buys about three cents’ worth of today’s goods — roughly 97% of its purchasing power, gone, on the Fed’s watch. It has one job.

Ben Bernanke · Milton Friedman’s 90th birthday · November 8, 2002

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

The Fed’s own future chairman, on the record, admitting the institution caused the Depression. Keep the date.

Then what happened. Six years later, Chairman Ben Bernanke did it again — the 2008 financial crisis, on his watch, after his Fed helped blow the bubble. The apology aged into a punchline. Nobody at the Fed noticed, because nobody at the Fed ever pays.

Richard Nixon · Televised Address · August 15, 1971

“I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets.” The Austrian school — Murray Rothbard, Henry Hazlitt — said the quiet part immediately: an unanchored currency is a blank check for the state, and the bill arrives as inflation. Hazlitt had written the whole playbook in 1946: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

“Temporary” is now fifty-five years old. The gold window is still closed. The check is still blank.

Then what happened. The dollar has lost roughly 87% of its purchasing power since Nixon’s “temporary” measure. Every war in Docket I, every bailout below, every trillion in Docket V — all of it paid for the same way: print first, ask never.

Ron Paul · House Floor · July 16, 2002

“Like all artificially-created bubbles, the boom in housing prices cannot last forever… it is time for Congress to act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors.”

H.R. 4884 — the Free Housing Market Enhancement Act. Died in committee. Nobody wanted to hear it.

Then what happened. September 2008: Fannie Mae and Freddie Mac collapsed exactly as described and were seized by the government. Taxpayers wired the mortgage industry roughly $190 billion, and the crash took the global economy with it. The man who wrote the script got no credit — just six more years of being called crank on cable news.

Cato Institute · Policy Analysis No. 528 · October 2004

Lawrence J. White documented Fannie and Freddie’s $1.8 trillion in assets resting on an implicit federal guarantee and called for true privatization before the bill came due. That same June, Mark Thornton at the Mises Institute titled his warning, without ambiguity, “Housing: Too Good to Be True.”

Not a bill — a paper trail. Published, dated, footnoted, and ignored.

Then what happened. The bill came due four years later, addressed to you. Cato’s “we published this years ago” file is now thicker than most legislation Congress passes unread.

Ron Paul · “The End of Dollar Hegemony” · House Floor · February 15, 2006

“He who prints the money makes the rules… Printing paper money is nothing short of counterfeiting.” He warned the housing bubble was already deflating, that “the worst is yet to come,” and that the correction could be worse than 1979–80 — the one that took 21% interest rates to fix.

Delivered to a nearly empty chamber, entered into the Congressional Record, mocked everywhere else. The full text reads like a spoiler for the next three years.

Then what happened. The worst came, eighteen months later, wearing a Bear Stearns logo. The counterfeiting charge aged into mainstream economics’ least-quoted, most-accurate description of QE.

TARP · October 3, 2008

Seven hundred billion dollars for the banks that caused it. The libertarian objection was one sentence, shouted into the hurricane: bailouts don’t end crises, they schedule the next one — profits stay private, losses go public, and every executive watching learns the lesson. Moral hazard, in the trade. Heads they win, tails you lose, in English.

The House actually voted it down the first time — 228–205 — and got to watch the market have a televised tantrum until it folded four days later and passed it. Democracy, brought to you by the Dow.

Then what happened. The banks were made whole; their executives kept the bonuses; nobody of consequence was prosecuted — one mid-level Credit Suisse trader took the fall for the entire crisis. Meanwhile the homeowner got a foreclosure notice: roughly ten million families lost their homes in the aftermath. The institutions learned their lesson perfectly. In 2023, when Silicon Valley Bank face-planted on its own risk management, the depositors were bailed out within seventy-two hours — including the venture-capital firms. Too big to fail is now just… banking.

Ron Paul · Rand Paul · Thomas Massie · 2009–present

Audit the Fed. That’s it. That’s the radical demand — that the public be allowed to look at the books of the institution that prints the public’s money.

H.R. 459 passed the House 327–98 in July 2012. Harry Reid — who had co-sponsored Audit the Fed in the nineties — never let the Senate vote. Rand Paul’s S. 209 won a 53–44 Senate majority in January 2016 and died anyway, because sixty is the new fifty-one. Massie now carries both successors: H.R. 24 (audit it) and H.R. 1846 (abolish it outright — Ron Paul’s 1999 original, retyped).

Then what happened. Nothing. That’s the point. The Fed’s balance sheet went from $900 billion to $8.9 trillion while Congress held zero full audits. The one partial audit we ever got — a 2011 GAO look squeezed out of the Dodd-Frank bill — found $16 trillion in aggregate secret emergency loans to banks, domestic and foreign, that Congress knew nothing about — over a trillion dollars of it outstanding at a single moment, at below-market rates, including $390 billion to JPMorgan while its CEO sat on the New York Fed’s board. Behind your back. And asking to see the books is the extremist position.

Thomas Massie · House Floor · March 27, 2020

“Mr. Speaker, I came here to make sure our republic doesn’t die by unanimous consent in an empty chamber, and I request a recorded vote.”

The $2.2 trillion CARES Act. Massie forced the House to fly back mid-lockdown and put names on the biggest spending bill in human history. The president demanded he be thrown out of the Republican Party. John Kerry tweeted that Massie had “tested positive for being an asshole.” The bill passed without the roll call.

Then what happened. Two years of the worst inflation in four decades. Massie’s post-mortem, September 2022: “Printing money caused inflation… I hope enough people will realize the firefighters are arsonists.” He was nearly excommunicated for insisting that $2.2 trillion deserved signatures. That is where the bar is.

Jo Jorgensen · LP National Convention · May 24, 2020

“Politicians are overspending recklessly, printing piles of money out of thin air… And how much inflation will we see? What will that do to the value of your take home pay, to your savings or your retirement nest egg?”

She was the Libertarian nominee for president, asking the question while inflation still sat under two percent. America had two other choices, both of whom had already signed the spending.

Then what happened. By June 2022 the CPI hit 9.1% — a forty-year high. The answer to her question was: quite a lot. Thanks for asking. Nobody else did.

Rand Paul · Senate Floor · December 21, 2020

“If free money were the answer… why stop at $600 a person? Why not $1,000? Why not $2,000? If you’re looking for more COVID bailout money, we don’t have any. The coffers are bare.”

Voted no on the $900 billion package. It passed 92–6. Six senators could do arithmetic; the other ninety-two had elections coming.

Then what happened. The M2 money supply grew 41% in twenty-six months — the fastest expansion in the history of the measurement. Prices followed, as prices do. The “hidden tax” he kept describing showed up on every receipt in America.