The Instigator
harrytruman
Pro (for)
Tied
0 Points
The Contender
anthonyliu1
Con (against)
Tied
0 Points

The Federal Reserve Should Be abolished:

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Voting Style: Open with Elo Restrictions Point System: Select Winner
Started: 5/27/2016 Category: Economics
Updated: 6 months ago Status: Post Voting Period
Viewed: 540 times Debate No: 91725
Debate Rounds (5)
Comments (6)
Votes (0)

 

harrytruman

Pro

There are a few terms to this debate that you should agree to before accepting the challenge, they're really simple I just have to state them to resolve a few issues. First of all you are not allowed to "drop out" of the debate, once you accept the challenge you must respond to my arguments in their entirety within 3 days, that way if you start to lose you don't get to flake out on me.

Secondly, google documents are not a conduct violation, you could just as easily as I can start a google document and respond to my arguments that way. If you do not respond to my arguments, it will be considered to have been dropped.

I've had some issues with people flaking out when they began to lose, reiterating their arguments rather than responding to mine, and whining about google documents.
anthonyliu1

Con

Hi, I registered as a new member at debate.org and accidentally accepted your challenge (I was going to vote "yes"). Anyway, I think I would still give it a go regardless of my feeling towards the Fed's undemocratic and pro-business bias. I'm not a native English speaker so please pardon me if my English isn't perfect.

Before we begin, there is one thing I would like you to clarify. When speaking about abolishing the Fed, are you referring to the abolishing of the central bank system in the U.S. or the private company status of the Fed?

This is the first time I have an online debate. I hope I can do a decent job.
Debate Round No. 1
harrytruman

Pro

Abolishing the entire federal reserve.
anthonyliu1

Con

Understood. Let's begin.
Debate Round No. 2
anthonyliu1

Con

It is true that the Federal Reserve may have pro-business bias due to its 100-year-old structure. However, abolishing the entire federal reserve or the central bank system is likely do more harm than good to America and to the rest of the world. There are two sides to every coin and it is important for us to focus on the big picture in order to prevent any dire consequence. it is true that the Fed is far from perfect and should have a significant reform; however, abolishing what is known as the the Federal Reserve today solves no real problems we face today.

If history is any guide, it shows that having some sort of central bank may have been better than none. Out of 100 years of the Fed control, the U.S. has had 22 recessional years, including one depression. The 100 years before the Fed saw 44 recessions and six depressions(1). Throughout history, rulers have debased the currency to enrich themselves and their political allies at the expense of the common people. It"s hard to find an instance where the state has not taken advantage of its control over money to benefit itself.

Looking at the Article 1, Section 8 & 10 of the Constitution, some may argue that it does not mention the need for a central bank, nor does it explicitly grant the U.S. government the power to create one. However, if we were to take the meaning of these two sections of the constitution literally, it is clear that the founding fathers of America intended a national monetary system based on coin and for the power to issue money rest only with the federal government. That means that any fiat money which is not coin-base would be unconstitutional. Any money issued through state banks but not the federal government should also be forbidden.

In this case, state banks are forced to print bills of credit in exchange for specie deposits instead of "official" national money. These notes bear the issuing bank's name and entitle the bearer to the note's face value in gold or silver upon presentation to the bank. However, there is one potential problem - state banks may issue notes far in excess of their specie deposits. Customers appear from time to time wanting to exchange their banknotes for specie. The banks make allowances for this by keeping some of the specie on hand at all times. If the specie/banknote ratio is too low, even a small unexpected increase in the withdrawal rate could force the bank into insolvency (bank run). Remaining depositors who had not withdrawn their specie would be left with worthless banknotes.

In addition, in free banking era, there were 712 state banks in operation in the United States , each with its own currency(2). It should take little imagination to picture the difficulty for a local merchant in tracking the riskiness and value of perhaps dozens of different banknotes in addition to the other concerns of his business.

Although those who adhere to a strict interpretation of the Constitution believe a central bank system is unnecessary as it was not mentioned in the Constitution, the structure of our economy advances and it is important that the Constitution advances with it.

---
Footnote:
(1) https://en.wikipedia.org...
(2) https://www.coursehero.com...
Debate Round No. 3
harrytruman

Pro

Yeah, and our economy grew at a rate of ~6.8% back then, so I think it worked pretty well, also, currency competition is a good thing.
anthonyliu1

Con

The Fed was created when the situation was the most dire in 1913 after the massive panic in 1907. The structure of the Fed is strange since its establishment because President Woodrow Wilson had to strike a deal (or to compromise) with Aldrich's supporters at the time. I haven't had a chance to read through the entire Aldrich-Vreeland Act but can reasonably imagine the proposal was much more bias towards the private banks. The Glass-Willis proposal was already heavily debated and reshaped before it was signed into law by Wilson. The Federal Reserve System wasn't perfect but it was already the most doable solution at that time.

Another important factor which needs to be considered is the current ownership structure of the US treasury notes and bills. Foreign countries such as China owns a massive amount of US treasury and expected to be repaid in the green paper issued by the Federal Reserve. If Federal Reserve were to be abolished and replaced by state banks or other chartered banks in the US, it will sure create a massive outrage regarding to credit default . Not only the new US currency/currencies will most likely be depreciated, the vast amount of redemption of the treasury notes and bills will probably bankrupt America as well.

We live in an era that businesses are no longer only conducted domestically but internationally, and the ability to control exchange rate is extremely crucial for international trade for every countries. To abolish the Fed basically means to forfeit the core weapon US has in a currency war. With the rise and liberalization of RMB and the already weakening petrodollar, it's not difficult to see where the US will be heading after shutting down the Fed.

In short, abolishing the central bank of the US will not only create chaos but is also an act of irresponsibility by itself. It's like killing Jon Snow only because he is an illegitimate bastard but ignore the fact that he is the only person who can protect us from the white walkers.
Debate Round No. 4
harrytruman

Pro

The panic of 1907 was caused by J.P. Morgan convincing everyone there was a panic, causing a run on the bank. This wasn't caused by a lack of bankers controlling the economy, this was caused by bankers controlling the economy. In fact, every single economic collapse before the Fed was caused by either a) European manipulation of the stock markets or b) fractional reserve banking.

If China wants to be played back in "official" US dollars which are accepted by all of America, and buisnesses need dollars usableaccross the U.S., that doesnt necessarily mean we need federal reserve notes, we can meet that demand for a national currency in a few ways, a) make gold and silver a tender across the U.S., or b) just printing United States Notes instead. I would make gold and silver our money to meat the demand of buisnesses in America but pay China in US notes.
anthonyliu1

Con

The story that JP Morgan was behind the 1907 panic is merely a conspiracy theory with no solid evidence. Since this is an intellectual debate, facts and proofs are needed to support your arguments. Moreover, I failed to see how the JP Morgan story is related to our discussion about the Fed at all. The Fed would have been established in 1913 with or without JP Morgan intervention in 1907 (if that was really the case).

Despite the irrelevance, allow me to share with you my views on the 1907 panic. If we look back at the economic conditions between 1897 and 1907, 10 years before the panic, it's not hard to see the why lots of the financial institutions including banks were already in stressed or distressed situation. Out of that 10 years, America was in recession for 8 years. The panic in 1893 caused by the Reading Railroad triggered a large crisis in the stock and commodity (gold and silver etc.) crises. Profits and incomes of many businesses dropped substantially and the credit condition became more difficult. In fact, the years 1897 to 1920 are what we call the the era of economic instability. Many banks were doomed to shut down or to have bank runs with or without the 1907 panic.

Let me get back to your response to my China argument. Since you are at the side of "Pro", if I'm not mistaken, you are at the side of abolishing the Fed hence no central bank. An establishment of a national currency without a central bank isn't impossible, but it's pretty near. Remember that the functions of the central bank isn't only to issue currency, but also to monitor the payment system and to regulate all state banks. The lack of a central bank will cause mass confusion of the credibility of the new US currency.

The restoration of the gold standard isn't practical either. The current gold reserve of the US (according the the world gold council) is 8,133.5 tonnes. The current price for 1 ton of gold is $35,090,816. This means the total gold reserve in the US would worth around $314 billions The US debt is more than $19 trillions and around 30% are owned by foreign countries. China alone owns $1.25 trillion and that means it will take the entire gold reserve of the US to repay only 1/4 of the debt owned by China if the country demands.

I personally like the gold standard but the US debt situation (especially after two rounds of QEs) is now too severely damaged to have the gold standard to be the remedy.
Debate Round No. 5
6 comments have been posted on this debate. Showing 1 through 6 records.
Posted by anthonyliu1 6 months ago
anthonyliu1
Nobody is voting? :(
Posted by WXL 6 months ago
WXL
I you get rid of the elo restrictions I will debate you. And I will not drop out unless there is extenuating circumstances (e.g. I get into an accident or something of that sort).
Posted by 42lifeuniverseverything 6 months ago
42lifeuniverseverything
And why should the constitution be abolished vi_spex? Oh wait I have it hold on.... ahem.

Constitution=Conservative=Evil=Death=Lost Rights=Slavery=Cruelty=Ad Infinitum cycle of cynicism about a great document.

Is that what you were trying to say?
Posted by SkyLeach 6 months ago
SkyLeach
@harrytruman most of us take into account argumentum ad infinitium when used by a participant in a debate when drafting our RFD
Posted by vi_spex 6 months ago
vi_spex
you mean constitution
Posted by marymac150 6 months ago
marymac150
you should withdraw the opponent qualifications you have on this debate
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