Steve Horwitz on the Conspiracy Behind the Federal Reserve
By David Henderson
Like other legislation of that era, the Fed was a government intervention supported both by ideologically-motivated and well-meaning reformers and by the industry being regulated. Rather than being this as some sort of unique conspiracy to take control of the US monetary system, it was a story very similar to those found in the history of everything from railroad regulation, to meatpacking regulation, to the regulation of monopolies and trusts as historians from Gabriel Kolko onward have documented. Unique historical factors in the monetary system affected the particular form the Fed took, but its broad history places it squarely in the tradition of the Progressive Era. If the Fed is the product of some nefarious conspiracy, so is a whole bunch of other legislation passed around that time.
This is from Steven Horwitz, “The Real History of the Fed: Why It Didn’t Take a Miracle (Or a Conspiracy!) to Pass.”
I had to read the piece, and especially this paragraph, a few times. Start with the title: “The Real History of the Fed: Why It Didn’t Take a Miracle (Or a Conspiracy!) to Pass.” I don’t want to pick on the title too much because I know, from having written a few hundred articles for other publications, that one rarely gets to pick one’s own title.
But on the assumption that Steve picked it, let me proceed. How is it a “real history” to leave out an important part of the history: namely, the highly secretive meeting, in November 1910 on Jekyll Island, of a handful of politicians and financiers who schemed to come up with reforms that would, only a few years later, become the basis for the Federal Reserve. That sounds like a conspiracy to me.
Here’s what author Gregory DL Morris writes:
The Jekyll Island collaborators knew that public reports of their meeting would scupper their plans. The idea of senior officials from the Treasury, Congress, major banks and brokerages (along with one foreign national) slipping off to design a new world order has struck generations of Americans as distasteful at best and undemocratic at worst–and would have been similarly received at the time. So the meeting of the minds was planned under the ruse of a gentlemen’s duck-hunting expedition.
Moreover, how does Steve know that it didn’t take a conspiracy to create the Federal Reserve? Maybe it didn’t, but maybe it did. Steve points correctly to a number of factors that helped set the stage for the Fed’s birth. But were they, in themselves, enough? He doesn’t establish that.
Finally, notice the last sentence of the paragraph quote above:
If the Fed is the product of some nefarious conspiracy, so is a whole bunch of other legislation passed around that time.
This caught Robert P. Murphy’s attention too. Steve seems to say this as a slam-dunk, the idea being that well, of course, we know that that “whole bunch of other legislation” was (were?) not the products of conspiracies. But do we know that? I don’t.
For more of my thoughts on conspiracies, see here.
For evidence that an historical piece of legislation was, in part, the result of a conspiracy, see Alex Tabarrok, “The Separation of Commercial and Investment Banking: The Morgans vs. The Rockefellers,” Quarterly Review of Austrian Economics, Vol. 1, No. 1, 1998.