What would the economy — and interest rates — look like without the Fed?
An upcoming Supreme Court case will decide whether voters control the Fed through their elected President.
Or if the unconstitutional Federal Reserve can continue like an occupying army manipulating our economy for their banking masters.
The case in question involves Trump firing Fed member Lisa Cook for mortgage fraud. Mainstream Keynesians are in full panic at the prospect of voters controlling interest rates — and the boom-bust cycle they cause.
But the deeper question is should the Fed control rates at all.
And what happens if it stops.
What the Fed Claims to Do
The Fed was originally sold as protecting the dollar and stabilizing the economy. The pitch was no more recessions, no more financial panics. And a dollar good as gold.
Instead, we got at least 15 recessions -- one every 7 years.
We got least 4 banking panics. Including 1929 — the Fed's masterpiece. Along with the S&L crisis in the 80's, the 2008 Financial Crisis, a pre-bailout in 2023, and myriad mini-crises along the way like the 2013 “taper tantrum” or the 2019 repo market spike.
All bailed out.
Meanwhile, the Fed gutted the dollar by 97% — it’s now worth 3 cents.
The wolf guarding the henhouse.
Freeing Rates from the Fed
Getting the Fed out of the money business is surprisingly easy: You don't even need gold.
Just announce the Fed will no longer target rates, and close the so-called open market committee.
Second — this is important — get the Fed out of the bailouts business.
So close the discount window and the myriad autopilot bailouts like Quantitative Easing or the 2023 “Bank Term Funding Program” that lent to banks on fictitious asset values.
At that point let existing Fed assets — the ones it bought with the bailouts — to mature and roll off. This cancels the dollars printed to buy the assets, which lowers inflation — potentially by 30% going by the mountain of assets the Fed’s hoarding.
Presto. The Fed’s out of the money business.
A World Without a Fed
So what happens then?
For starters, Wall Street collapses.
Because Wall Street is a fractional-reserve pyramid scheme built on recycling -- “rehypothecating” -- assets with implicit Fed bailouts.
This actually happened in 2008 when W said he wouldn't bail out Lehman Brothers. Which crashes bank stocks by almost 90%.
Permanently ending Fed bailouts would be 2008 on steroids.
So pretty much every bank and investment house goes bankrupt. They don't disappear -- just shareholders get wiped out. The banks themselves are bought for a song by people like Warren Buffett who must now run them as sound banks.
So Wall Street's a lot smaller -- maybe half or a third what it is today.
Rates in a Post-Fed World
But specifically what happens to interest rates, which are how the Fed drives both inflation and recessions.
Happily we know what happens because our fair republic did not have a Fed for its first 150 years.
Including a 30-year period -- the so-called Free Banking Era -- where governments didn't even bail out banks by suspending gold redemption.
During those 30 years we had no boom-bust cycle or financial panics. But interest rates were higher: about a point or two on government debt but closer to three to four points on corporate debt.
So in today’s terms, you’d have 5 or 6% government debt and maybe 9% corporate debt.
This is because all this debt — including corporates — is cheap because the market expects the Fed to bail them out in a downturn. You may remember the bailouts of Ford, GM, AIG and Fannie Mae in 2008, all back-stopped by the Fed’s money printer.
If they're no longer being bailed out, risk goes up. Meaning rates go up.
Higher rates then hit all assets, including stocks and house prices. Which might fall 20 to 30% going by historical interest rate changes.
In return, the Wall Street casino is over -- bankers go from hookers and coke slinging the next bailout to the 1800's bespectacled elder in a conservative suit.
What’s Next
The Fed's not ending anytime soon -- historically it takes a crisis. Prediction market Kalshi is currently running 10% odds of Trump "ending the Federal Reserve."
Still, it's useful to look past the Wizard of Oz and ask what happens if get the Fed out of the business of manipulating the economy.
In short, no more cycles of inflation and recession. No more bailouts. At the cost of a one-time 20 to 30% haircut for boomers and more like a 70% mass extinction for Wall Street.
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Gold goes UP, is what happens....
If you don´t like the phony -too low rates or trust the idiots in power
then you buy gold....
The free market is right in front of you.
You have a lot of fake accounts, unfortunately. They seem to be harassing your followers, as you’ve probably heard.