Where did this thing called the Fed come from? Murray Rothbard has the answer here -- in phenomenal detail that will make your head spin. In one extended essay, one that reads like a detective story, he has put together the most comprehensive and fascinating account based on a century's accumulation of scholarship.

The conclusion is that the Fed did not originate as a policy response to national need. It wasn't erected for any of its stated purposes. It was founded by two groups of elites: government officials and large financial and banking interests. Rothbard adds a third critical element: economists hired to give the scheme a scientific patina.

This excerpted chapter from Rothbard's History of Money and Banking is as scholarly as it is hair raising. This is one economic historian who fears not naming names and assigning blame.

The Progressive Movement1
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 fierce 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 financial house of J.P. Morgan and Company, had tried desperately to establish successful cartels on the free market. ...

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Murray N. Rothbard
Lugwig Von Institute

The financial elites of this country, notably the Morgan, Rockefeller, and Kuhn, Loeb interests, were responsible for putting through the Federal Reserve System, as a governmentally created and sanctioned cartel device to enable the nation's banks to inflate the money supply in a coordinated fashion, without suffering quick retribution from depositors or noteholders demanding cash.

Recent researchers, however, have also highlighted the vital supporting role of the growing number of technocratic experts and academics, who were happy to lend the patina of their allegedly scientific expertise to the elites' drive for a central bank.

To achieve a regime of big government and government control, power elites cannot achieve their goal of privilege through statism without the vital legitimizing support of the supposedly disinterested experts and the professoriat.

To achive the Leviathan state, interests seeking special privilege, and intellectuals offering scholarship and ideology, must work hand in hand.

Contents
SECTION ONE
The Progressive Movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION TWO
Unhappiness with the National Banking System . . . . . . . . . . . 11
SECTION THREE
The Beginnings of the “Reform” Movement:
The Indianapolis Monetary Convention . . . . . . . . . . . . . . . . . . 15
SECTION FOUR
The Gold Standard Act of 1900 and After . . . . . . . . . . . . . . . . . 33
SECTION FIVE
Charles A. Conant, Surplus Capital,
and Economic Imperialism . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION SIX
Conant, Monetary Imperialism,
and the Gold-Exchange Standard . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION SEVEN
Jacob Schiff Ignites the Drive for a Central Bank . . . . . . . . . . . 71
SECTION EIGHT
The Panic of 1907 and
Mobilization for a Central Bank . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION NINE
The Final Phase: Coping with the
Democratic Ascendancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION TEN
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

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