Federal Reserve System and the base of "capitalist" America.

Since 1913, we have kindly allowed The Federal Reserve System to monopolize the issuance of the currency market. The decision was based on the idea that having an oversight of such market would promise stability in our country's financial system. However, it has not carried out that promise at all. All it has created are a series of booms and busts that inevitably will drive us into the ground. That event is showing signs of possibility today. This system has become so commonplace that we have accepted the business cycle as a part of capitalism. That is not at all the true case. Money and capital of such that is the blood of any market, most so a capitalistic market. If the currency is not capitalistic or managed by its own market, then the system is not capitalistic at all. That is why it is not free market capitalism that brought us to where we are today and where we will go.

I would like to thank MClaro for posting this debate. Good Luck, and Welcome to DDO!

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Con did not clearly state the resolution, so I will state what believe it to be:
Con's resolution: The Federal Reserve has had a positive affect on the U.S. economy.

MClaro, of course, has taken the Con position.

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It would seem that MClaro's main problem with the Federal Reserve is that there is not perfect stability in the U.S. market. He blames the Federal Reserve for "creating" the boom and bust cycle. Logic can disprove the latter, and the former is an irrational expectation.

It is irrational to expect that any entity could create perfect stability in any market. Even full planning (i.e. pure and full socialism) could not cause a market to be perfectly stable. What the Federal Reserve has done is to make the market more stable than it would be otherwise.

According to the following wikipedia article that lists all of the recssions in U.S. history (http://en.wikipedia.org...) recessions are fewer and further between since the creation of the Federal Reserve. Since 1913 there have been 18 recessions (including depressions). That is an average of one recession about ever 5.388 years. Prior to 1913 there were 29 recessions, giving it an average of a recession every 4.344 years. The average length for recessions (number of years for each recession divided by the number of recessions) since 1913 has been approximately 1.11. The average length before 1913 was 2.05. These numbers show clearly that recessions have occurred less often since the Fed was created, and that the length of those recessions is almost half of those prior to its creation.

Con also mentions that the Federal Reserve has "created" the boom and bust cycle. However, the boom and bust cycle has been a part of capitalism for as long as capitalism has been around. You cannot have capitalism without a boom and bust cycle. A governing entity could do things to make the cycle less severe (like create an entity similar to the Federal Reserve), but they could never fully get rid of it while retaining any degree of capitalism.

We could assume that Con probably means that the Federal Reserve makes the boom and bust cycle more severe; or, through its practices, create bubbles where they would not otherwise exist. If this is the case, I hope that Con will expand upon this point in his second round of debate so that might more fully address it.

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Con closes with the claim that our system is currently not pure capitalism, and he implies that it is pure capitalism (or at least a more pure form of capitalism) is responsible for the rise in power of the U.S. economy.

On the first point, Con is correct. We do not have, nor have we ever had, a purely capitalist system - and for good reason. Pure capitalism results in a huge gap between the rich and the middle class. It results in exploitation of the working class through poor working conditions and low wages. Pure capitalism allows for businesses to employ and exploit child labor. It allows businesses to manage their waste however they please, which means the cheapest method (read: large scale pollution). It also allows businesses to harm consumers. These are just a few of the major problems with pure capitalism. The Federal Reserve is not responsible for checking these practices, but the point is that pure capitalism is not ideal.

On the second point, Con is very wrong. America's rise as a world economic power occurred after the First World War (1914 - 1918), but especially after the Second World War (1939 - 1945). What does this mean? This means that America's rise as an economic power took place AFTER the Federal Reserve (1913) was created.

To clear up the issue PRO has with taken my resolution, it is in my very choosing and title of this debate that I addressed my resolution. In all simplicity, I am CON for the very existence of our Federal Reserve System and the "capitalistic" market it has created for us.

My opponent has addressed the same dim look upon capitalism that we have heard economically left liberals weep about since such socialist ideals were strung up. The truth is all of those issues can be addressed within the capabilities of macro capitalistic procedures. My opponent criticizes capitalism with two points. One is the exploitation of workers. The choosing of the argument is understandably justified for during our free-banking era (After Andrew Jackson destroyed the Second National Ban of The United States), their were many wrongdoings at the expense of workers. But, who says that the idea of collective bargaining is a non-capitalistic idea? It is a matter of freedom of enterprise and freedom of speech that all individuals are guaranteed in a presumably capitalistic and freedom based country. It is when the government steps in for or against the systematic makings of the protest that free-market ideals are violated. Sure it may have been taken advantage of in the free banking era: a time of war, social conflict, and European National Bank's and their power hungry doings. However, if we were to have a free banking system today along with Government exclusion in dealings with private industry unions those issues would either be non-existent or brought to light through are blue-collar appreciating media and the mistreatment of workers would be ultimately bad for business. The other argument against pure capitalism my opponent debates is how capitalism virtually widens the income inequality gap. However, it is clear in this Wikipedia page: "http://en.wikipedia.org...; that gap between rich and poor is constantly growing in a market my opponent admits is not capitalist. As a matter of fact, the income inequality we have today is historically significant cited in this huffington post article: http://www.huffingtonpost.com...... Again, all in a economic system my opponent claims is not capitalist. For that I agree with him.

To reiterate my comments about the boom and bust cycle, I must say my opponent's idea of the boom and bust business cycle is an ambiguous phenomena not only prevalent in economics but all social studies. It is when the certain industrial (in this case credit) tendencies fall into highs followed by lows that I believe to be artificial and not naturally started. The best example is the amount of credit The Federal Reserve incited during "The Roaring Twenties" caused by their increase in the money supply and then the detraction before the Great Depression after the Margin Loans were called in. That is not a natural market tendency if the ENTIRE THING was artificial and entirely created by The Fed's Board of Governors.

My opponent is correct when he claims that no entity can create a perfectly stable market, but that opinion depends on what he believes a stable market is. According to classic economic theory, reaching the natural unemployment rate is a perfectly stable market. Even though there is an acceptable unemployment rate. Now a side-effect of monopolized and perpetuated inflation is an unstable natural unemployment rate, thus a result of the Federal Reserve's existence is the worse off tendencies of rates that would persist positively with the hand of the market. So where my opponent is either theoretically and historically mistaken or brainwashed by many years of economically liberal sob-stories is where the root of his falsehoods lay.

Also, I call on my opponents gullibility considering the corrupt circumstances surrounding the Federal Reserve's founding that is not only widely accepted but deemed necessary for that particular time by people who have become naive due to the regularity of the federal reserve. I would like to know what my opponent thinks about well-known truths like The Jekyll Island meeting, the Rockefeller-Morgan rumors inciting the panic of 1907, the promise to sign the federal reserve act by Woodrow Wilson before being elected in exchange for campaign contributions, and the very corrupt and debt continuing essence of a central bank of paper money. Doesn't my opponent find it corrupt and an abuse of power that the federal reserve being the ONLY source of internal capital to the treasury while having the freedom to raise and lower the very interest rates that the treasury must pay back. Eventually, when the debt is funded the treasury goes back to the federal reserve resulting in an inevitable rate of growing debt. That is why not only this system is inefficient, it's very existence is corrupt, power-ridden, and hidden from the American people. So I ask, does my opponent find these truths acceptable and trustworthy. That is, if those facts are debated of course.

First, I would like to express my hope that Con will be more courteous in the final round of debate. His several personal attacks in the second round were not helpful to his case and are most unfortunate. I hope that he can clean up his act for round three.

I will also note that Con did not respond to the evidence provided in round one that recessions have been shorter and further between after the creation of the Fed. This omission on his part is not insignificant.

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Con begins on the point of labor exploitation. He states that collective bargaining can be a part of capitalism. The implication here is that unions can take care of workers and government regulation is not necessary. However, early union history showed many problems with precisely this system advocated by Con. When workers would begin to unionize, people would be laid off and whole factories would be shut down in order to prevent collective bargaining. The same would occur during strikes. Those striking simply lost their jobs. Pure capitalism would allow businesses to engage in these practices. Under pure capitalism, there is nothing to stop businesses from doing this. (http://en.wikipedia.org...)

The next point made by Con is that the income gap has grown in the past decade. Although the link he provided was to a wikipedia search that did not have any results (lol), I accept as fact that the income gap has indeed been growing in the recent past. I find it rather odd that Con would use this argument. The deregulation that has taken place since the Reagan Administration, and especially during the Bush, Jr. presidency is almost always cited as the cause of this increased gap.

The final point made by Con is that the founding of the Fed. is marred by corruption and shady dealing. However, you cannot entirely judge and entity today on things that happened nearly a century ago. There have been periods of corruption in the U.S. presidency. Would Con get rid of the presidency for this reason? If there was corruption in the past and does not exist anymore then there is no problem. If there is corruption now then we can reform the system to rid it of its corruption - we do not need to completely destroy it.

It is evident in the supposed personal attacks in my first round argument that the finger I point is directed at the many who have been convinced that the federal reserve is necessary to maintain a stable economy. The attacks are not personal attacks and I will apologize if they were offensive and misunderstood but I will not take them back for the very gullibility I speak of is quintisenntial to my point.

My opponent brings up the history of union mistreatment and corporate mistreatment of industry. Even though in my first argument I told of how certain capitalistic factors were taken advantage of in the free banking era. I explained that in today's extensive media invovlement in the issues of workers, it would be many times more negatively effective in the business interests of large corporations. Any chance of exploitation would diminish greatly.

My opponent blames the recent income gap explosion in an economy my opponent agrees is not capitalistic on the deregulation that has been ongoing since the Reagan years. I partially agree with him, for many of these regulation theories include regulation of the secrecy of the federal reserve. He particularly is talking about financial deregulation. In all seriousness, deregulation is not true deregulation, the money is still backed by debt and credit is still unlimited. Any regulation or deregulation in a system like ours will produce results that may look beneficial or the complete opposite. Whatever it is the long term is still going to be recession, inflation or stagflation.

My opponent also claims I did not address the issue of the length of artificial boom and bust cycles after the federal reserve was initiated. It must be known that we have never had a true free banking period for te free banking era was a time when states regulated interest rates and reserve ratio's. An improvement I would take over the system we have today but sill not a free banking time. A completely capitalistic currency market is a revolutionary idea but not a new one.

I assume my opponent is aware of the certain corrupt circumstances around the FED's founding and has accepted them. Defending his opinion by comparing it to the past corrupt presidents. However past presidents have done these things beyond the limits of the law like Harding and Nixon. However they were democratically elected. The FED's board is completely hand picked by our elected. Not by us. So there is a major difference.

I would like to begin by thanking Con for leaving out the ad hominem attacks in the third round.

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Once again the reader will note that Con did not address the fact that recessions have been shorter and further between since the creation of the fed. This was not an insignificant point, and he chose to leave it unanswered. The only response he had on this point is that we have never had a true free banking period. My point that was before and without the fed, recessions occurred more frequently and lasted longer. If it is a free banking that Con wanted and was defending, he should have made a case for that. He never discussed how or why a free baking system is superior to the Federal Reserve. This debate was about whether or not the federal reserve had an overall positive or negative impact on the U.S. I showed on this point how the fed has had a positive impact on the U.S. Con did not have a suitable response.

My opponent makes the claim that the long term consequences of both regulation and deregulation is recession, inflation, or stagflation. Again, he is technically correct - but only because the business cycle means that one or more of those are inevitable. The point that I have consistently made, and that Con has ignored, is that the Fed makes these recessions occur less often, they are less severe, and they end sooner.

Finally, Con returns to the point of corruption. I made the comparison between the institution of the U.S. presidency. My opponent counters that the presidency is a public institution while the Fed. is private. Fair enough. But that does not defeat my point that past corruption ( or even current corruption) is not a sufficient reason to end the Fed. Since it has been shown that there have been positive benefits from the Fed. it would be better to reform it than destroy it. We can more closely scrutinize the Fed. to weed out the corruption, while keeping the benefits.

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CLOSING
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The only point relevant to the resolution that my opponent has made is that the founding of the Fed. is mired in corruption (and I extend for him that there may have been corruption at other points in its history, and it may exist now). However, I have sufficiently countered this point above.

At first, Con blamed the Fed. for artificial boom and busts. He later admitted that this cycle is a natural part of capitalism. He implies that the Fed. makes them occur more often. However, he does not explain why, or why a free banking system would make booms and busts occur less often.

Finally, Con did not respond to my main argument, that the Fed. serves its purpose of stabilizing the economy by making recessions fewer and less severe. This is undeniably a positive consequence of the Federal Reserve.

Since Con did not make a sufficient case for the negative consequences of the Fed.;
nor did he make a case for the superiority of an alternative system;
nor did he address my main argument showing that the Fed. does indeed have positive consequences,
I urge the reader to vote Pro.