January 14, 2026 Anno Domini
In defense of the Federal Reserve, there are two things:
- The Federal Reserve has been in the news recently due to the Department of Justice pursuing criminal charges against Fed. Chair Jerome Powell. These charges are politically motivated to pressure the Fed into lowering the interest rates.
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Many libertarian and Kremlin-compromised types, such as Rand and Ron Paul, mischaracterize the Fed as the head of an all powerful banking cartel which prints money out of thin air and devalues the money supply through expanding fiat currency. This is simply not true.
With that said, I think it is important to talk about what the Fed is and what it actually does. The financial system is the most complex system in the world, so I will try to make this as simple as I can.
The reason why our money is constantly being devalued is systemic. It comes from our reliance on fractional reserve banking (usury) and socialism. Money is created whenever a loan is created. So, when someone buys a house for $500,000, they take out a 30-year loan. The bank which issues the loan only has to hold a small percentage (typically 10 per cent; although, the reserve requirement was changed to zero per cent under Trump in 2020) as a reserve. The remaining 90 per cent of the money is created into existence by the banks’ double-entry bookkeeping. Therefore, there is a relationship between loans, money creation, and inflation. The lower the interest rate on a loan, the more attractive loans are to take out, the more money is created, the more money created means more dollars chasing goods and services, which means inflation.
The main purpose of the Fed is to ensure stability in the currency. The Fed’s primary tool to do this is that it sets the exchange rates between banks (called the Effective Federal Funds Rate). Basically banks make millions of transactions between banks every day, and in order to have a certain amount of money in reserves and stay solvent, they loan each other money at the end of the day to square up. The rate banks can charge other banks for lending money is the EFFR. This rate essentially serves as a rate floor, i.e. the lowest possible interest rate the banks will charge for a loan. So when inflation is too high, the Fed will raise this rate, which will lead to fewer loans being issued, which means less money is created, which means that there are fewer dollars chasing goods and services and, thus, less inflation.
This way of regulating money creation is actually a good system and aligned with capitalism because the people who really need loans will still get them. It remains a free choice whether you want to buy money. That’s not saying that fractional reserve banking is good but that if we are to regulate it the way the Fed does, it makes sense.
The other thing that the Fed gets a bad rap for is the country’s national debt. The Fed always seems to get blamed for the national debt, when in reality it has very little to do with it. The main reason we have a national debt is socialism.
Our national debt is created by the treasury department issuing bonds. When we don’t have enough tax revenue to cover the cost of running the government, the treasury department issues bonds on the bond market. The bonds, or “T-Bills,” can then be bought by anyone. When you buy a T-bill you are paying the government $100 for the governments promise to pay you back that $100 with interest. The government has gotten into a situation for the last several decades where it has so many T-Bills outstanding that it is issuing new T-bills to pay for old T-bills. That is why the National Debt is 38 trillion dollars and the interest on the debt is one trillion dollars a year. It has nothing to do with the Fed. The only thing the Fed has done with regards to Treasury bills is to step in on rare occasions and buy T-bills when no one else is willing too. This is known as quantitative easing, or being the buyer of last resort.
As anti-Communists, we need to understand that the attacks on the Fed are an attempt to destabilize the dollar as the reserve currency of the world so a BRICS currency can take over. The Fed isn’t the issue with our monetary system; it actually does a pretty good job as a regulator, keeping things from getting out of hand. The issue with our monetary system is that there is no free lunch, and we have about a century of usury which has compiled debt. We need to get rid of the usury, not get rid of the Fed, or else they will establish a BRICS currency, or as Klaus Schwab would say, a great reset.