Ask Dr. Ruwart

"How will Libertarian government deal with the tremendous hold the international bankers have upon the world political/economic system?"

My short answer:

"Bankers are powerful because they have a monopoly on creation of a country's money supply and because they are not held personally liable if their bank becomes insolvent. Libertarian governments would not give bankers these advantages.

"In the early 1800s, Scotland had a banking system similar to what a libertarian country might have. Banks each had their own currency, backed by gold. They collectively operated a clearinghouse so that each customer could use their bank notes freely. If a bank started 'over-inflating,' it was 'punished' by the clearinghouse, which refused to take the inflated money at face value.

"Since owners were personally liable for depositors' funds, banks rarely inflated dangerously anyway. When an occasional bank went under, the depositors were reimbursed by other banks seeking their business.

"International bankers could not maintain their stranglehold under such a system."

For more detail, see Chapter 9 of my book, "Healing Our World" or query further.

Question:

"I was wondering what the libertarian stance is with regards to the Federal Reserve. On one hand, it is an institution that is somewhat independent of the government (like a private business) and it generates profits from check collection that go to the Treasury and lower taxes. It also seems to have prevented another great depression. On the other hand, it is a regulator that forces banks to follow certain procedures. Are there aspects of the Fed that libertarians would change, would they propose an alternative, or do they like it? Thank you very much."

My short answer:

"The Federal Reserve is a private institution that has been given a monopoly on the money supply by our government. The member banks of the Federal Reserve are corporations, who enjoy limited liability due to government decree.

"The Federal Reserve actually contributed to the Great Depression, because it permitted banks to reduce reserves. The devastating inflation that results from expanding the money supply, which the Federal Reserve was designed to do, outweighs any positive benefit derived from check collection.

"In a libertarian society, an institution like the Federal Reserve would lose its monopoly status and its members would lose their limited liability. The Fed would have great incentive to lower its expansion of the money supply as a result. This new, libertarian, Federal Reserve would be more like a clearinghouse for member banks, than an instrument for economic control. For that reason, many libertarians believe that the Federal Reserve, as we know it, would not exist in a libertarian society."

(For more detail, see Chapter 9 in my book, Healing Our World.)