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Do We Really Need the Federal Reserve System?

Abolishing the Federal Reserve System might seem like a drastic idea, but not when you get the full story…

You see, Congress created the U.S. Federal Reserve System to restore public confidence, provide the banking system a source of liquidity that would prevent its collapse and protect the public against inflation.

A century later, the banking system is so big its risks dwarf the Fed's liquidity capacity, and what cost a buck back then now will set you back $21.

That's why we asked Money Morning Chief Investment Strategist Keith Fitz-Gerald to explain how the Federal Reserve System actually helps a country's economy.

Most importantly, we wanted to know if the United States – or any country – even needs the Fed anymore.

Just listen to Fitz-Gerald's answer in the following interview.

For more on the U.S. Federal Reserve System, check out 5 Things the Federal Reserve Hopes You'll Never Find Out.

Join the conversation. Click here to jump to comments…

  1. richard | May 29, 2013

    We as is in the usa never did have a need for the socalled federal reserve. They have been leaching off of us more than long enough. This country got along quite well with out them, all they actually are are abunch of elitest, robber barons. All they want to do is suck the economy in this country dry.

  2. fallingman | May 29, 2013

    The country needs the Federal Reserve like any one of us needs a gigantic tapeworm.

    Out with the parasites.


  3. Klaus & Karen Jaenisch | May 29, 2013

    We are for getting rid of the Federal Reserve. What is the alternative/solution? We the people need to take our government back! We are going down hill like the Roman Government because peoples lack understanding of the real problems and possible solutions!

  4. harold | May 29, 2013

    What is the alternative? The idea of the fed to backstop banks and prevent runs is a good idea. I don't know about the rest of its functions like interest rate setting or providing liquidity to smooth out the economy. These latter two functions are more wizard of oz than actual science. I do see benefit in providing liquidity to banks if needed to prevent systemic problems. However bad banks should be made to fail if bankrupt and the depoisitors covered up to the fdic insurance limits. Anything in deposits above this shouldn't be covered, this should should be something all depositors understand.

    • Rikstace | May 31, 2013

      Harold, please, please research more about how the Fed came to be, and educate yourself on what it's actually used for. There has never been any possible good that came from the Fed. It has 'indebted' every country that it has invaded. There is nothing 'Federal' about it. It's a private bank owned by a private group of individuals. A law was passed (with help from 'them') to prevent any books in English being printed to reveal the owners, and operations of the Fed. Information is only available from various limited sources here and there. You can see on Youtube until they take it down, it's amazing:

  5. RePete | May 29, 2013

    Is the problem the FED, or is it the big banksters who play fast and loose because they know they will be bailed out. I say, let a few big banks fail and then the rest will clean up their act. Not to worry, one persons loss is another persons gain, and that's the way it's supposed to work.

  6. H. Craig Bradley | May 29, 2013

    Piaget's Stages of Cognative Development

    American's have never really understood monetary theory ( a.k.a. "politics") nor do they exhibit much interest in it to this day. Widespread ignorance is what we largely have. One retiree in my neighborhood asked: " The question is: Is the FED part of the FEDERAL government?" As it turns out, it really matters little at this point.

    British Economist John Maynard Keynes said "not one in a million people understand how inflation actually works". Actually, the late Mr. Keynes might be a tad charitable today. We have a FED because our leaders have always been corrupt or the schrewd U.S. BANKERS are able to worm their way into the Congress or White House and buy-off the occupants in any era. What can the people do about it? Not a damn thing, that's what.

    Piaget comes in because many adults have undeveloped brains about such abstractions. Piaget's studies are remarkably relevent to a collective lack of financial common sense, both with the masses and the elite ( political leadership). We like to think that if we crunch a bag of potatoe chips and have more chips, then we are better off, but don't realize the weight of the bag and its contents remains unchanged no matter how many potatoe chips we create. Anotherwords, having more dollars does not mean anyone is particularly wealthy or "rich", unless of course, you happen to be a billionaire.

    • H. Craig Bradley | May 31, 2013


      People hold onto their pet notions like a dog defends and knaws on his bone. If you attempt to hold an opposite opinion, they will either attack you personally, or otherwise attempt to discredit you by any and all means, especially the lame stuff which usually involves lying and making false statements. This is one reason why today's political environment has become so caustic. Accordingly, personal vandettas can easily develop in today's society and last for years and years. Lawsuits alone may not be effective in dealing with or changing such hardened personal attitudes or individuals.

  7. H. Craig Bradley | May 29, 2013


    If the FED fails, all the banks and financial institutions (and your money) connected with it will also dissappear. Do you want to start completely over at 55 years of age? If the FED were to collapse, then baby boomers would face a retirement in poverty. Many would become angry and probably take it out on whoever is available. If the spouse is away, then kick the cat. If the Bankers are in Paraguay out of harms way, then riot in the streets and burn down the bank towers. The Greeks showed us what can happen when the masses have nothing left to lose and plenty of anger to go around.

  8. LeDuque Flumage | May 30, 2013

    Check this out and then decide

  9. Steve Miller | May 31, 2013

    Failure is an integral part of capitalism. WOW. Great comment. Let's get back to a free market
    society and end the Federal Reserve.

  10. FIAT | June 12, 2013

    The FRS is a commercial entity (i.e. banks) with a relationship with our federal government that wa setup in 1930. These banks get paid by law a 6% rate just for being a part of the FRS. Our founding fathers would have never approved of this system. We are in a new generation of time and circumstances. There is more money in our economy and world system than in 1930. There is no reason this should exist anymore. Also the money we print today in 2013 is useless and it is not backed by anything substantial (i.e. gold). The value of our monetary system is set arbitrarily. This is such a scam. Come on America, you are way smarter than anyone you voted for! Lets get rid of the FRS!!!

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