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Sept. 6, 2025 - Epoch Times
01:10:46
Everything You Need to Know About the Fed | Jeffrey Tucker
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The law, as written by Congress, the implementation legislation of the Fed says that the president can fire a Federal Reserve board governor with cause.
In this episode, Jeffrey Tucker unpacks the recent controversy surrounding the Federal Reserve.
He's the founder and president of the Brownstone Institute and senior economics columnist at the Epoch Times.
No president since 1913 has taken on the Fed the way Trump is taking it on now.
And the Supreme Court, I think, is going to have to decide.
How did the creation of the Federal Reserve change America?
Does President Trump have the authority to fire a Federal Reserve governor for alleged mortgage fraud?
And what does it really mean to be an independent federal agency?
What's striking to me about this?
For all these years, this question has never really been asked at this level, much less answered.
This is American Thought Leaders.
And I'm Jan Ya Kellick.
Jeffrey Tucker, so good to have you back on American Thought Leaders.
My pleasure.
Good to be here, Jan.
Let's start with this recent firing of the Federal Reserve Governor Lisa Cook.
Is this something that can happen?
This is something that's wildly contentious in our and it's seemingly in our society, and people are coming in on either side.
What what's your take?
Well, she refuses to resign, uh besides believing that it can't happen, that she's untouchable in some sense, so the president cannot do this.
The problem is that the law is written by Congress, the implementation legislation of the Fed says that the president can fire a Federal Reserve board governor with cause.
Right.
That's what it says.
Which implies that the president is in charge.
It's the president is what keeps the Fed accountable.
Now, Trump believes this, and so he found somebody on the board that he can fire with cause.
Now, the allegation, I have to say allegation because that's the way we talk, but actually it's true.
She uh named two separate primary residences in her mortgage applications.
Uh you can't have two primary residents, these residences.
Um the advantage for doing that is that you get favorable um interest rates because on your primary residents uh less risk, so you get a more favorable uh loan rate.
So she got two favorable loan rates.
And then you've got really interesting problems concerning the deductibility of interest.
Uh you can only deduct the interest that you pay on a loan from your primary residents if you buy the second, third, and fourth house that's you know on you.
So actually, this is a a federal crime to do this.
And maybe it's common.
Maybe it goes on all the time, we don't really know.
Maybe there's a certain class of borrowers who just do this routinely.
Uh Lisa Cook treats it like it's no big deal, like a parking ticket or something like that.
But it's actually a federal crime.
So if you're looking for some reason to go after a Fed uh board governor with cause, this is a good cause.
So I think Trump will prevail in this particular case, but it will have to be decided most likely by the Supreme Court.
What's important here, Jan, is there's a lot more at stake than just this one regulation about residences and mortgages.
It has to do with whether and to what extent the Fed is actually in char uh accountable to the president of the United States.
That's what's at issue.
What's striking to me about this is that the Fed has been around since 1913.
This question has never really been asked at this level, much less answered.
For all these years, this country, we've pretended as if there's such a thing as an independent central bank.
And everybody knows what that is.
Well, there's another word for independence.
That is unaccountable, right?
I mean independence sounds great, unaccountable sounds bad.
Well, the Fed's unaccountable.
Uh they've not been held to account uh for any outside audits in its entire history.
Uh any political intervention is widely seen by financial markets as something like a catastrophe.
Uh, You're risking the nation's financial stability, and so on and so on.
But you know, in the end, we are governed by this document called the Constitution.
And we're a nation of laws.
And the Constitution has three buckets.
It has judiciary, has the legislative branch, and an executive branch.
In the org chart of the federal government, printed by the federal government, that everybody agrees is true, the Federal Reserve is under the executive branch and reports to the president.
You can see it.
The org chart is very clear about that.
You can say it's independent.
Well, is that just sort of a norm that we just have a hands-off policy?
Well, this is what I was going to ask, because you know, for certainly in the judiciary, precedent is hugely important.
It impacts a great many things.
Is that the case here?
Because clearly, as you've outlined, the precedent has been, you know, independence.
So we don't really know in a constitutional sense what that means.
And you'd think that we did, we would know, but we don't actually know what it means were there to be an independent agency under executive department.
So what's exciting about the times in which we live is that we're finally getting answers to these questions.
The Supreme Court's been very clear up to now that the president is in charge of the agencies, executive agencies.
So let's just say the Department of Labor or USAID or Department of Energy, Department of Agriculture, or HHS, they can, in fact, fire employee.
Now, five years ago we didn't know the answer to this question, right?
I mean, I think we've had these discussions for a while.
We we didn't actually know whether the president was really in charge of executive agencies.
The Supreme Court, in a series of cases, has been very clear the president is in charge of executive agencies, but we know Trump.
That's great, but now Trump is taking on the great question of American life, which is the status of the Federal Reserve under the law.
That is an unanswered question.
So this is a taboo topic.
It's we've never been here before.
No president since 1913 has taken on the Fed the way uh Trump is taking it on now.
And uh the Supreme Court, I think, is going to have to decide that this is an executive agency.
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And now back to the interview.
And maybe, you know, give me a little background here.
Why, um, for those that are uninitiated, why would the president feel right now that he needs to take on the Fed?
Trevor Burrus, Jr.
Well, he's he's uh the President Trump's annoyed at the Fed because he thinks that uh they're keeping interest rates too high.
Now, you can agree or disagree with that.
I happen to not really to agree with that, but I do agree that you need some accountability for the central bank.
I mean, you can't just have this floating financial institution.
Uh arguably the most important institution in the United States, the most impactful institution in the United States.
And by extension, the world.
Yeah, right.
That's right.
Yeah.
The globe, because we're on a world dollar standard.
So the Federal Reserve is the most powerful institution, yeah, arguably in the world.
And um, and it's just this free-floating agent out there that nobody knows to whom it it reports, if it reports to anybody.
But under the Constitution, um, yeah, the founding fathers were not uh idiots.
So they knew, you know, they knew the monetary issue was an important issue for any any country.
Uh But they addressed a lot of things in specifics in the Constitution.
They addressed copyrights and patents, they addressed even like the post office, they address all sorts of uh specific issues, but trade, for example, is in there.
But one of the issues they address in Article 1, Section 8 is the money power.
And they specifically grant to Congress the job of uh coining currency to managing currency and coining uh money.
All right, so that belonged to Congress.
Well, very quickly after and that's for a reason.
Because they understood that monetary powers quite frequently abused by the the executive kings, coin clipping.
You know, hundreds, thousands of years of abuse of the monetary financial system by big shot executives, whether it's pharaohs or kings or princes, whatever.
So they wanted it to belong to the Congress, which is to say the people.
That was a specific decision made for a specific uh reason.
It's very wise.
And they also even restricted the states from making anything other than uh gold and silver uh uh as money because they wanted to mitigate against the problems of inflation, inflation, depreciating currency, because they knew this had led to upheavals in the past.
They you can read the founding fathers on money.
Uh they had a lot of uh views on this topic.
Um uh Thomas Paine's most famous for having written common sense and railing against the ermid urban ermine robes of of King George, whatever, but actually he has a lot of writing on the monetary question too.
He hated paper money.
He said paper money was the source of great evil that leads to inflation and business cycles, uh, trade cycles of booms and bosses.
He had very sophisticated economic understanding.
And I'm not saying that Tom Paine was some sort of unique figure.
This whole generation understood that bad money can ruin uh uh a country and a society and send the entire culture into upheaval.
So they wanted sound money and they wanted hard money, and they wanted the money to belong to the people, guarded by the people for the people.
That's why they had um in Article 1, Section 8, they granted to Congress the power to uh coin money and restricted even the states.
Now we had a 10th Amendment, so states have a lot of rights, but they did not have the right to create paper money.
That's in the Constitution.
So that's how serious they were about this topic.
Now, soon after the founding, there was an effort to create a national bank, and uh it didn't last long.
Now keep in mind when we say so.
We had the first uh national bank and the second national bank in throughout the 19th century, in the early first half of the 19th century.
Keep in mind a national bank is different from a central bank in important respects.
The national bank is really a bank for the government.
It's like Congress makes debt, the national bank buys it and holds it, maybe prints money to buy the debt.
And so they have this relationship between the bank for the government and um uh the the government has its own bank.
I mean, that's the national bank.
Now it's famously subject to all sorts of corruption, as even from my description.
Bond rackets, debt scams, profigate spending.
There's there's bad stuff associated with uh with national banks.
And so it was kind of inconsistent with the American ethos.
Uh this was not a central bank.
It was just a bank for the government.
That's that's what it was.
And so um it it went away, then it came back, and then it went away again.
Andrew Jackson famously railed against it as a monster, you know.
So this is a lot of the um debates about money in the first half of the 19th century surrounded this issue of the national bank.
So then we had a long period of what's called free banking.
Um lasted for many years, and there were there were changes in the kind of regime that the relationship of the treasury to the money, what we're gonna have money, we're gonna have a gold standard, a silver standard, biometallism.
There are all sorts of acts coming out from Congress regulating this stuff.
Um but uh during the you know, the 1870s and the 1880s and 1890s, we had um uh growing outrage against what was called wildcat banking.
So we had railroads going through the country, um, and everywhere the railroads went, property values would rise and business would start popping up.
And of course, banks popped up at that area too.
And they started lending money to everybody, and that if the railroad failed or didn't actually show up at all, the the banks would go belly up and take everybody's deposits and people get angry.
So that was called wildcat banking.
Lots of booms and busts.
Banks were regarded as normal institutions.
It's like grocery stores or newspapers or just another market institution.
They could fail, they could succeed, but it was it was determined by the markets.
Now that's a little fraught for uh from the depositors' point of view, you know.
You you can't notice.
You got to pick well.
Yeah, you gotta pick well.
But there was competition between banks and bad bankers went out of business, good bankers thrived.
I mean, it's a kind of a decent system overall, but maybe not you know, incredibly popular for for people whose lost or deposits, that sort of thing.
But there's a lot of pressure during this period to stabilize the institution.
You know, something that just strikes me, Jeffrey, uh, off, you know, I can't help but think that in a society that's very focused on safety, that prioritizes safety, this is something that really wouldn't wouldn't work in the kind of society that we're in today, for example.
Yeah, it was even in the world, it was an unusual situation.
America had a uniquely free system.
There were other examples of free banking uh in this period of history, but but America had a pretty darn free uh system.
It was imperfect, but it was pr it was pretty good.
No real guarantees, at least not from the center.
Um so it was a pretty good system.
And you know, look, you have to grant that it the whatever you can complain about system, but it actually uh was a kind of handmaiden or shepherd of the greatest period of growth in in industrial history, really.
Um what happened to the American economic uh structures between 1860 and say uh 1910 was a marvel for all the world.
You know, it was during this period where we got the commercialization of steel.
We created uh new cities with skyscrapers, we had uh sound recording and photography and flight and and electricity, lighting up uh uh homes and then cities and uh communication and telephones.
It was just the most marvelous period of invention and expansion of incomes, a democratization of proper prosperity that we saw in America made America famous all over the world.
I mean, in the second half of the 19th century, there was a growing sense in the entire planet Earth that whatever America was doing, they were doing it the right way.
And uh democratization of prosperity.
I love that term.
Well, the the all the incomes were rising and um across all classes, you know, it's not like the the tales that you hear from the Gilded Age, which the rich got richer and the poor got better.
No.
I mean, all the data shows that everybody was was growing wealthier uh systematically.
Yes, some more than others, but everybody was better off.
Um the monetary system we had was free banking at first, and then we had uh codified gold standard um after the Civil War.
And that was a government imposition.
The beautiful thing about the gold standards is it restrained congressional spending.
Uh there was no ability to print.
Uh the existence of physical gold restrained credit expansion.
It put money in the hands of the people.
Gold and silver circulated among the people.
So this was a hard money country, but you know, gold coins dangling in your pockets, you know, and banks uh, if they were issuing notes, which they did, they would keep gold in their vaults, you know.
And uh that was it was a good system, it was a brilliant system.
Remarkably, during this period, uh between uh after the the gold standard and then all the way up to um uh say 1910 or so what happened to prices?
Well, the the value of the money gradually grew.
I mean, imagine that.
You save money, and then after five years, you go back to that money that's in your mattress, and you find that it's more valuable than it was when you put it in, right?
That's a remarkable thing.
We call that deflation now.
But at least under the gold standard, it meant that the propensity to save was even apart from the interest you earn, you would be rewarded for your for your prudence, for uh for your frugality, right?
And so America became a country of frugality and saving.
Saving was always rewarded.
Uh prosperity, invention, creation.
I mean, it was glorious.
It's no wonder.
You know, by the 1890s, uh almost all of European politics said, Well, you know, we've tried the aristocracies, we've tried our monarchies, we've tried our kings and queens and multinational big shots running everything in our empires.
But let's face it, we're all going to be eventually be Americans.
Look at what they're doing over there.
And so this experience uh really did inspire the entire planet Earth.
And America was never more confident than it was under the gold standard in those years.
We it was also in those years that we developed all of our uh what our civic pride, um stories of the founding fathers, our national holidays, the music that we associated, the marches and uh the flags and signs and symbols.
American uh pride uh and you could say even patriotism was born during this period and for good reason.
Um and I guess my point is that this is all very interesting, but that the monetary regime being hard money, money belonging and to and controlled by the people and by independent enterprises was a major reason for that.
So now we have to fast forward to to the Fed because uh uh that's where things really began to change.
And so, you know, this is now we're talking about 1913.
And so what just very briefly, why?
Well, a lot of it had to do with the panic of 1907.
Um but uh like in all politics, sometimes uh the crisis is exaggerated for a reason.
But there was uh something like a frenzy after 1907.
We can't stand this system anymore.
Ups and downs and bank failures and panics, and oh, we don't know if the money is there.
Uh this is a problem, we don't know if the if the debt holders are even going to be paid.
Uh uh we need to bring science to monetary policy.
So one of the things that was part of the ethos of the time.
Um you could look at the prosperity that unfolded over those 30 or 40 years and say, that's a miracle of entrepreneurship, enterprise, and freedom.
Or you could look at that and say, wow, this is a consequence of good managers, excellent engineers, excellent science, uh, the primacy of rationality over randomness, right?
There's two interpretations you could give.
So as time went on, uh, that second interpretation uh prevailed.
So there's an uh uh a growing uh sort of uh valorization of expertise and management.
And they said, look, we should bring this spirit that's given us all these great inventions in the and the private sector to government itself.
Let's put the experts to work on banking and money.
And and the experts did uh come together, famously at Jekyll Island and put together this this new institution.
Um it's a funny institution with a funny name because it's actually not a national bank.
Yes, it is a national, it is national bank, but it was more than that.
It was it became a kind of um regulatory cartel owner of all banks in the country.
So you could not be a bank unless you were a member of the Federal Reserve.
Federal Reserve was going to response be responsible for all clearing systems.
How we got paid, you know, when you finally get the thing that you're going for them when the money arrives at the institution that it's intended for.
That's called clearing.
And that was going to be entirely charged by the Fed.
That was entirely managed by the Fed.
And so there wasn't going to be any, but no more wildcat banking, no more independent banking banks were not going to be this free enterprise operations where there's pop up and go away.
No, no.
It's all going to be controlled by the Fed.
So it was both a national bank and a banking cart, a private banking cartel, uh granted special rights by the federal government.
So it's it's it exists in this strange place.
And it and that was in 1913.
How is it private?
Well, it's entirely privately owned.
I mean, these are privately owned banks.
They're they're privately owned banks with a uh federal uh charter from the government.
The banks being all the members?
Yeah, well, all the banks are are privately owned.
Sure.
Yeah.
And um, and so it's a private cartel.
It's like the banks, the biggest banks, uh, leaned on Congress to codify a centralized system that would retain their private status while forbidding competition from outsiders, from wildcat banks and random people.
Uh so this the system itself is kind of is privately owned, or you could say as a quasi-public public private.
I don't know what to compare it to.
I'm sure there's a a good comparison there.
Well, clearly the board of governors is not private.
Right, that's right.
So uh this is where we get into a lot of ambiguity.
So this is where it gets really interesting.
Is it public or is it private?
This is where and if it is public, who controls it?
The voters?
Congress?
Supreme Court, the president?
Who?
What does it mean to be an independent agency?
Uh we know from the Supreme Court that these don't really exist in other areas of the federal bureaucracy.
We know now that the president's in charge of them.
Well, what about the Fed?
But that was always ambiguous in the in the law.
So what happened was this is the way it's normally described.
Congress decided in its wisdom to uh take its powers over over monetary matters, Article 1, Section 8, and delegate those to this new institution called the Federal Reserve.
Now you should just reflect for just two seconds.
You know, you and I are both interested in words.
Um the word Federal Reserve is by itself funny because it doesn't say central bank.
Americans hated the idea of a central bank because that was more like Germany and Bismarck or whatever.
They didn't want that.
But central bank is not an American institution, so they called it something completely different.
It's actually kind of genius.
They called it first the word federal, federal meaning decentralized, you know, consistent with the Tenth Amendment.
You know, we're we're these United States.
We don't have a central government.
We we have a federal system where we, you know, and so uh so to to accomplish that federal piece, uh the uh the the new central bank had uh branches, you know, had uh Minneapolis Fed, Atlanta Fed, a Dallas Fed, Chicago Fed, you know, San Francisco Fed.
So there's many Federal Reserve banks around the country for and for no apparent reason, really, except to create the illusion of decentralization.
Okay, so there was that.
And even now they're they're gigantic and they employ all these researchers, and they say interesting things.
Um but there's no really there's no reason for all these feds around the country.
Uh the second part, this word reserve is is funny when you think about it, because uh it implies that they have something.
They're in the possession, we have the reserves.
Just in case we need them, we have the reserves.
If there's a crisis, we're gonna be there to help you.
Uh you can have confidence in the system because we have reserves.
You know, whatever.
In those days it was gold.
Yeah.
Well, we'll we're you don't need to worry.
Finally, we have a system that's stable and functioning and scientific.
Now the science part of this thing uh uh is is also interesting because it comes along at the same time that macroeconomic theory was sort of developing.
And the idea was that the Fed eventually would not initially, but eventually uh the Fed would guarantee uh would would seek low inflation and um high employment, or at least low unemployment and some sort of economic stability.
So they had this sort of mission, a big broad mission, uh managerial mission over the whole country.
Um the original Fed uh keep in mind so the founders of the Fed, and the ethos of the time was they're tired of the chaos.
They're tired of the chaos of the markets, they're tired of the bank failures.
We're gonna stop that, but we're also going to guarantee low inflation.
I mean, that this is widely believed.
Um now there's plenty of people out there that think the Fed is just a big demonic conspiracy, uh, racketeers.
Uh I maybe there's an element of that or whatever.
But what I see in the founding of the Fed is as a sincere uh an authentic desire to stabilize the system, bring uh intelligence, rationality, managerial prowess and expertise to uh uh a sector of society that had long been subject to waves of chaos.
I think they had every intention of of doing good work.
The founders of the Fed weren't all they weren't bad guys.
They many of them wanted sound money.
In fact, some of them wanted to stop uh the credit expansion.
They didn't like the way these wildcapped banks, you know, you'd have a bank pop up Bob's bank, oh the railroad's coming along, here's your money, here's your money, it'll lend the money, I'll collect the money, and then the bank goes belly up and people lose their deposits, you know.
And then the the bandits would be on the run.
Uh they didn't like that.
They were kind of stodgy old timers in a way.
Let's have gold and uh frugal thrifty middle class and stop with all this nonsense, right?
So this is the sort of the ethos of the of the first Federal Reserve.
Um but but the problem the problem is that in the end, despite its name, despite the intentions of the founders, it was a central bank.
And and if I may, just you know, talking about words and words changing meaning, you know even growing up, you know, hearing about Federal Reserve or Federal anything, I it didn't never occurred to me, you know, and of course I grew up in Canada, I wasn't taught these things, right?
Yeah.
But that federal meant decentralized.
I in fact thought precisely the opposite, that federal meant centralized, that it's a function of the federal government.
Yeah.
Well, this this traces to an ambiguity in in American history over the word uh well and and it's just it's very interesting because that maybe that the shift in the understanding of their word maybe reflects, you know, the the the shift of how at least some aspects of our society think about how we should be governed.
Right.
Yeah, you know, even at the founding period before the Constitution, there's uh there was a little a lot of mix-up about these words because they were the Federalists, you know.
Right.
And and a lot of people looked at the Federalists and say, you're not Federalists, you don't believe in a federation of states.
You're centralists.
You want you want a central government.
Uh the people who objected to the Constitution came to be called the anti-Federalists.
Now, that's funny because of course they were the real Federalists.
I mean, if you believe the anti-Federalists, they were they believed themselves to be the real Federalists and the what was called the Federalists were really centralists.
So this is where the ambiguity uh comes from.
But I think generally we use the word federalism to mean um a decentralized system.
And and yeah.
And in American history, that means um granting uh to uh states rights.
And we still have uh many, many uh states states' uh rights.
We still have a a federalist style system.
100 percent.
Yeah.
100 percent.
And you know, Lord Acton said that um that federalism was the the only true great innovation of American political life.
The The idea that you would have an overseeing kind of structure that was severely restricted in this power, but most of the powers belonged to the historical uh political units called the states.
Lord Acton said that was the great achievement of American history.
Trevor Burrus, well, the famous term is right that they're the laboratories of democracy.
And indeed, you know, I'm just thinking right now about Dr. Joe Ladapoe in Florida declaring that he's going to get rid of all mandates in Florida law mandates.
And there'll be other states that, you know, what you could call them supermandated to believe, you know, this is kind of kind of the opposite of that.
And in fact, some have even declared that in response to this, something, something in that vein.
But there you go.
There's that opportunity.
You can see how this is a great example.
Right?
Yeah.
We're kind of we're we're deviating.
But it's important, it's important uh connects to our topic because of the very name Federal Reserve.
I mean, the there's this thing never would have gotten through under any circumstances with under a different name.
If it had been called the Third National Bank, it would have been dead in Congress in no time.
but because it was called a Federal Reserve.
Or the Central Reserve.
Or the Central Reserve, or the Central Bank, you know, like, or the Bundesbank, or the, you know, the Bank of England, you know?
These were central banks, but in America, we didn't have we didn't have that.
We had a Federal Reserve.
And they created all these branches around the country just to underscore the point.
And in those days, you know, um progressivism, what came to be called progressism was was was an ethos alive in the country.
Uh the belief that we would uh take the tools of science and and apply them to public policy to um engineer progress.
This was the essence of progressivism.
And that revealed itself in a number of uh ways which we now, I think find regrettable, like eugenics policy was a progressive uh kind of policy.
Um prohibition of alcohol was kind of this mandatory uplifting the population.
Um consequence of progressivism.
But 1913 was a remarkable year because you had to another aspect of progressivism was the income tax.
I mean, before 1913, uh just imagine every penny you earned, you got to keep.
It didn't belong to the federal government at all.
I mean, they had no access to any of your income before 1913.
And so we had the uh a constitutional amendment that enabled uh the income tax.
We had uh really a shocking uh uh uh amendment to the Constitution that eliminated the bicameral Congress and forced the Senate to be elected by the people in the States instead of being appointed by the state legislature, which fundamentally changed the structure of the U.S. Senate and eliminated the bicameral structure of the founding fathers and replaced it with what was essentially an experiment.
Well, what I'm saying is that the Federal Reserve was the same kind of experiment.
It was a progressivist uh experiment and the application of expertise and science to the sound management of the monetary system of the country.
You know.
And but what's interesting is that of course, of course, and anybody would have predicted this.
I mean, Thomas Jefferson certainly would have Thomas Payne, this whole generation would have predicted.
If you get anything like a central bank, a national bank, a central bank, it will be abused.
It'll be abused immediately, but the matter the intentions, whatever, it'll be abused.
So what presented itself soon after the Fed was founded?
The war in Europe.
The Great War.
It was a mess, a terrible mess.
And the Americans wanted nothing to do with it.
But at some point, so what what kept America out of war is for the most part was we just didn't want to afford it.
We didn't have the money.
You know?
Solve your own problems.
We're over here on the other side of the world, we can mind our own business over here.
And uh we don't have the money.
Well, now with the Fed, you have the money.
You've got a printing press.
You've got this weird power of this one institution to buy and hold government-created debt with money that didn't previously exist.
A check.
You know, uh a credit card.
The nation had a credit card with an infinite balance on it.
You know, infinitely high uh limit.
What could go wrong?
What could go wrong, right?
That actually, you know, and again, I think the founders of the Fed didn't really imagine this.
They thought, well, we're we're all look at us.
We're responsible guys.
You know, we know what's what we would never do something like that.
Well they lost control of it right away.
And so the Fed was probably the reason why the U.S. entered the Great War.
That was probably the reason.
And certainly, and there's been a lot of res uh empirical research about this.
The Great War would never have happened without central banks in Europe funding it.
The entire Great War was a central bank funded fiat money, you know, debt financed project made possible by central banks, among which the Fed.
The Fed um didn't uh invest itself as heavily in war as say the Bundesbank or the Bank of England or something like that or the Russian central way.
But uh still I don't think the U.S. would have ever entered that war were it not uh for the Federal Reserve.
And then the problems began, you know um I people don't understand this, but and soon after the the war ended, uh the U.S. experienced one of the worst inflations uh between uh between 1918 and 1921 and the dollar lost.
Now the data's a little unclear on this but as best we can tell the data lost as much as uh half its value.
Uh the dollar lost half of its value.
Yeah.
Yeah and this this was not entirely because the Fed was going into the open market and buying government debt and printing money because we were under his gold standard but because the U.S. had involved itself so much in lending to to foreign governments they paid back this in in the form of gold.
We experienced a huge influx of gold to the country, which did two things.
It reduced the value of all existing stock of money, right?
That's the way inflation works.
So a huge importation of gold from abroad led, just like it did in the Spanish Empire, an importation of gold leads to inflation.
So we experienced this big inflation.
because of the war and then a big a business boom that resulted in a huge business cycle bust in 1921.
Now fortunately in those days uh we weren't we were we didn't we we weren't yet disciples of John Main and Keynes and we weren't we weren't using the federal power of the federal government to try to reverse the economic downturn.
There was a complete laissez faire hands-off policy who cares and the thing corrected itself in 18 months and we were we're we're we're back again.
That was the very first crisis of the Federal Reserve you know happened very very quickly afterwards inevitably now at that point they should have said you know what let's unplug this stupid money machine you know for all the problems of the Wildcat banks is better than this but uh better than total war conscription mass death and upheaval all over Europe that these central banks caused but they didn't do that.
The Fed went back to trying to run a sound business policy.
But five years later, they couldn't fix the problem.
And the credit expansion extended.
It continued.
And then the Fed faced another problem.
Every president wants lower interest rates.
We have four years.
We get a new president in.
He inhabits this sort of world.
He gets annoyed.
He wants to see rising prosperity.
He wants to see economic growth so he can get credit for that.
And a major inhibitor of that always is the limitations of the financial system.
And if the Federal Reserve has the power to determine the lending rates between itself and its member banks, which it does, it can set any rate it wants, then the Fed bears responsibility for the interest rates of all the way up and down the yield curve throughout the entire country and can drive growth or it can drive pullback on growth.
Well, that's the president taking big issue with that right now.
And again, I'm not here to agree with Trump's evaluation of this.
Although, in his defense, he's a businessman.
And he's worked in debt and banks all of his life, raising huge empires all over the place of business development.
uh and and dealt with banks, and he always wants the best rate.
Like as a businessman, he he's not going to accept uh the rate that's given to the the the Hoi Poloy, you know, he wants a right, he wants the best rate on his on for for the money that he's getting.
He believes in debt.
Um he believes in leverage as a businessman.
He came of age in the day, age of leverage, so he believes in leverage and he believes in low rates.
So he's that he's using that model and applying it to the entire country.
So I get it.
I think it's reckless, but I get it.
So this may not be the ideal conditions under which to challenge the Fed's so-called independence, but I am nonetheless delighted by it.
I think this is reckoning we have to have.
Who's in charge of this thing that we that we call the Federal Reserve?
Well, and so in terms of, you know, there's a great number of institutions in this country that are involved in finance, right?
Private, private, public, public.
Um we do have this astonishingly large debt in America right now that's kind of been accelerating, right, through the interest payments and and so forth.
How much of a responsibility does the Fed have for this reality in your mind and the grand scheme?
Yeah.
Uh so uh big question uh I I do recall that when I was a uh sophomore in college as an economics major, uh, when I discovered the power of the central bank in terms of its capacity to drive prosperity, uh uh drive inflation, send whole societies into upheaval.
French revolution, the Bolshevik Revolution.
I mean, you go through it, look at the Weimar inflation of Germany, you know, arguably without which we would never have seen a Hitler.
Uh you realize that the the monetary piece of public policy is huge.
It's gigantic.
It's something that once you start looking into it, you become obsessed with it.
You know and I did.
I did.
I I wrote my undergraduate thesis on on the Federal Reserve, in fact, um and on the gold standard, and it was the longest thesis in the history of the Academy where I attended, uh, because I just got I just got obsessed with it because I think it is really important.
I um lots of people argue for a constitutional amendment to balance the budget.
A lot of people want the Congress to cut spending and so on and so on.
But until you unplug the Fed's capacity to just print money and cover up for all the profligacy of Congress, we're never gonna get there.
We need we need sound money, or we're never gonna get anything remotely like a balanced budget.
It's the Fed that makes it all possible.
It is the Fed provides a moral hazard that results in ever bigger government, ever more debt forever.
And you know, I I'm cautious about people who always want to paint the chairman of the Federal Reserve as some sort of demonic devil guy.
I don't think that's really true.
A lot of these guys have every aspiration to uh to run a good policy.
I mean, I think Jerome Powell, uh let me phrase this.
I think Jerome Powell knows what's right.
And I think he wanted to run a sound policy.
He inherited Ben Bernanke's policy of zero interest rates, which is a grotesquely irresponsible policy.
It never should have been imposed after 2008.
And it bloomed up the assets of Federal Reserve.
They wanted to normalize the balance sheet, and Jerome Powell had every intention of doing that.
And that's what he did do.
Uh he started cranking up interest rates a little bit of time, wanted to normalize uh Federal Reserve policy, make it more responsible, uh, clean up the Fed's balance sheet, get all these these bad mortgages off the books, and set us back on a good policy.
He's a sense he is a sensible, reasonable human being.
But uh they came to him in early 2020 and said, uh, Mr. Pell, you may be a good manager of the monetary system.
You may be a good and respected head of the banking system.
You also have responsibilities to larger issues, like the priorities of the federal government, too.
And we've got a virus on the way.
And we're going to have to deal with this, do with this in a big way.
This campaign you have to raising interest rates has got to stop.
Right now, starting now, I'm I I don't have a transcript.
I don't know for a fact this happened, but you can look at it in the data.
They got to him.
Right now.
You are federally chartered.
You have a responsibility to the to the government here.
We want these interest rates to fit and match what's about to happen.
So sure enough, I think it was about March 12th, maybe March 10th.
He slammed the rates back down to flat zero and accommodated trillions and trillions of dollars of congressional spending for the for the coronavirus.
And uh uh created more money in those 18 months to two years than we'd ever seen really in American history, certainly since World War II.
I mean, it was an unbelievable thing.
This is not what Powell wanted, but it's what he had to do because he was being pushed from every end.
We don't know whom.
And because the structure existed to actually do it.
Because it was possible.
You know.
You can send you you can send your uh college kid off uh with a credit card with an unlimited balance on it and tell him uh tell him to be frugal and be careful about his spending.
But he's probably not going to be.
That's essentially what we're dealing with with the Federal Reserve.
We've got the whole federal government on this Fed credit card, and they just can't stop, they can't stop it.
Trevor Burrus, Jr.
And it also just strikes me that the way, and just please comment on this, but the way it structured strikes me that the locus of responsibility seems to be diffuse or unclear.
Trevor Burrus, Jr.
Yeah.
Right.
So this is right.
And this is what I think we're gonna have to get settled.
And this is why I admire what Trump's done so much with this.
I I think what Trump's done here with this Lisa Cook thing is just brilliant.
I mean, he found a way in to test the powers of the people's elected leader over this central bank that has lived for more than 110 years in this kind of obscure floating realm of independence.
And and you know, we don't really have access to their books.
We don't really know what could what goes on with the Fed.
Yeah, they have to um present reports to Congress.
Uh the uh the uh the government can audit them like they audit the Pentagon or anybody else, but they've never been exposed to an outside audit, like any big company would be.
They've never been outside.
Even the Rand Paul's introduced legislation, his father before him uh going back decades to audit this thing.
Uh it still has not been audited.
So uh there's weird stuff going on.
It's an unaccountable uh institution.
It's it's really a beast.
Um it's responsible for the financialization of the of the U.S. economy, the explosion of the capital goods sector at the expense of the consumer goods sector.
It's arguably been the reason for the the for the blow-up of the managerial state and for the puffiness and frothiness of the uh uh of the corporate corporate world, the centralization of business, um, the persistence and and rise of the media.
It's like a lot of things.
But what what's the frothiness of the business world exactly?
Oh, but just I just thought you have like ever since ZERP since 2008, uh we we have a whole sector of society of of uh people inhabiting uh high-level corporate positions getting paid very high salaries uh because of their resumes and don't actually do anything.
Okay, that's the frothiness.
This is this is well documented.
And it's a shock, really.
Uh and I think the Fed uh bears most responsibility for that.
That was zero interest rate policy.
When money is free, uh you'd be crazy not to not to carry debt.
You're crazy.
If you should make any money at all, you're gonna be making more than it costs you to borrow money.
Right.
But that that only works for people who have the ability to access that money.
That's right.
It's a very specific group of big players.
It's big business.
That's the reason why big box stores are taking over everything.
I mean, but we've got a weird situation in this country where you don't have small businesses that are happy to do small businesses.
Most businesses started these days to be acquired by another business.
And those businesses are acquired in hopes of being acquired again.
It's a crazy thing.
And this is especially true in the world of finance.
You know, you would never start a fund with the expectation to hand this fund off to your kids or their kids.
No.
Your goal is to be impressed buyers who buy you, and their goal is to impress even the higher bars.
Everybody wants to be Golden Sachs.
Right.
It's terrible.
Well, and just on that note, you know, I know a number of scenarios where people who understand exactly how this works have built a small businesses so that those numbers look just right for the people that are going to be doing the acquisitions.
It's astonishing, right?
But the because but the actual sort of the inherent value is not very interesting.
Yeah.
If that makes sense.
Like it creates this weird.
Trevor Burrus, Jr.: It's very strange.
And a lot of it is because of the leverage and the debt finance and the financialization that's taken place.
Like there's so much fakery in the world because of the central bank.
You know, which creates a real So we're at a very interesting time.
Because we are maybe on the verge of solving this problem.
What is the central bank to whom is it accountable?
Is it an executive agency like the org charter of the federal government says?
Or is it somehow I don't know, independent.
I don't know.
By the way, can Congress really give up its powers?
It was it was given control.
And in Article 1, Section 8, over the over the money and the coinage.
That's what the Constitution said.
This is your job, Congress.
Can they really just write a legislation that goes, yeah, we don't like this so much?
And toss it over to the Executive Department?
Can they really do that?
Can you just delegate whatever you want?
I mean, how do we know that the Federal Reserve Act was even constitutional?
Do we know that?
Has it ever been tested?
It's never been tested.
I'm not sure they can really do that.
And if they're going to do that, then they d have to expect that the head of the executive uh uh uh departments, you know, the the head of the executive branch will expect to have some sort of managerial um control over the central bank because um Article 2, Section 1 says the U.S. President is the head of the executive branch.
The Federal Reserve lives under the executive branch.
It's not complicated.
Okay.
The Constitution says this power belongs to Congress.
Congress punted, gave it to the president.
Well, now the president's gonna be in charge.
I think it's the way it's gonna be.
I was the Supreme Court really gonna say, yeah, I know there are three branches of government and all that kind of stuff, but central bank, we're just gonna let that float around.
You know, that's not good.
That's how can you you can't say that.
There's nothing in law that would seem to make it possible for the Federal Reserve to forever claim to be some independent, floating, all-powerful hegemon.
Trevor Burrus, Jr.
And if if I may comment, you know, I'm just kind of thinking through here everything that you're saying.
And it's not entirely clear to me, you know, and I'm always thinking of you know what Alan Dershowitz calls, you know, the shoe is on the other foot test.
Just think like what are the ramifications of a decision in the future with different people with different ideologies, different approaches dealing with it.
It's not clear to me which of these solutions actually is the one that makes most sense.
Yeah.
Yeah.
Including even the in I mean, I suppose the independent floating one is when you don't you really don't want because you end up with this situation where you have, you know, for example, in the UK, these independent NGOs kind of making decisions for the for the executive in effect.
Trevor Burrus, Jr.
That's what the founders feared the most.
They they feared what you know, an unaccountable uh central bank.
That's that's why it never really gained traction.
Um every time.
So that's an unlikely route.
That's Let's let's leave that one out.
But is it you know what does it look like Congress taking control of monetary policy?
What is that actually would what would that even look like?
And does it yeah, I don't I don't really have an answer to that.
Um part of the problem is and I wrote an article for the APOC Times a couple of days ago.
Thank you, by the way, for publishing that.
Uh some I I I at the outset of the article warned everybody it's the most boring article you will ever read.
But I I did a taxonomy of monetary regimes.
Like 10 possible um policy priorities and systems that you could have uh uh in this country as uh as as uh systems and also possible routes of reform, you know, paths to reform.
So I can map out to you right now what I think is the ideal system.
And I think we had that in this country.
It was free banking combined with uh a congressionally uh established and presidentially enforced gold standard.
I think that was beautiful.
I mean it's not so simple to say let's go back to that.
I I don't know how you would do that.
I don't know how you get from here to there.
But look, we have what we have right now.
We're going to get something different soon, right?
Probably as a result of a of a court decision over this very, very provocative, but I think quite brilliant move by Trump to go after a Federal Reserve Board Governor.
Fire her for cause, and then just see what happens.
I don't know.
I don't know how it's gonna end up.
I I can see dangers in all directions.
I will tell you this.
I think it's time for some accountability, and it's time for some clarity about what this thing we call the Federal Reserve is, to whom it's accountable, and whether and to what extent the voters have any place or role in oversight and controlling it.
If we don't, uh you know, we we're gonna continue to lose our our uh our economic freedom, our independence, our aspirations for an enterprising economy with frugal people who can save money and be rewarded for doing so.
There has to be a change.
We live in times uh of great nostalgia where people want to recapture what we've lost as a nation.
Freedom, independence, frugality, prosperity, uh families that can live off one income and so on.
So I none of this is going to be possible unless we can figure out a way to restrain the Federal Reserve.
I think in a f in a circuitous and sometimes familiar way, President Trump gets that.
Intuitively, he understands that.
This institution must be held to account.
It must be accountable to the people and to the people's representatives.
And I think that's a good decision.
I think it's a good step.
Let's see how it turns out.
Well, Jeffrey Tucker, it's such a pleasure to have had you on.
My pleasure.
Thank you, Young.
So everyone, before we finish, I want to try something a little different.
I met a new friend, Andrew Sorcini over at Beverly Hills Precious Metals.
He's been working with someone I trust very well on uh purchasing gold, silver, other things.
And it's actually a huge opportunity to kind of learn about what's happening.
I've been watching the gold market, and it's I think it's the highest price ever, actually, that it's at right now.
Can you just tell me what is going on and what does that mean for investment?
And by the way, just as a caveat, I am myself deeply invested in gold, not with Andrew's company, but but I I see that as an excellent place to put wealth these days.
Oh yes.
So so for the past um five years or so, the BRICS nations, which are Brazil, Russia, India, China, South Africa, and now a whole slew of other countries, they're they're um trying to de-dollarize the globe.
Meaning they don't want the world's trade to work on the dollar.
And what this has done is uh they've been hoarding the Earth's gold in record amounts with the idea of coming out with some sort of a central bank digital currency that's gold backed.
That's been the single driving force on why gold has been blasting off recently and really it feels like there's no end in sight.
Well, that's and that's interesting, but isn't this sort of working as are you are you basically saying if I'm investing in gold and silver and precious metals that I'm actually working against the United States here?
No.
So what happens is is that um when Donald Trump actually gave his inauguration speech, the first words out of his mouth were uh the golden era of America begins right now.
And he keeps throwing out these um gold innuendos, and a recent one actually ties into what's happened this week.
So um a little while back, he actually tweeted on X. It said, um, he who holds a gold makes the rules.
And on that day, gold went to $3,500 an ounce.
Then in over the next couple of months, it did go down below 3300.
Today it's sitting at $3,550 per ounce.
And and I believe that um that we are going to one up what the BRICS Nations are doing with our own gold holdings, there's a good chance that gold could be revalued, meaning it could have a new spot price significantly higher almost overnight.
And for people out there that might be watching, you can Google that.
Not that everything's on Google is true, but you can you can get a general consensus as to whether or not this is possible and why it would uh why it would benefit countries.
And just to close out this thought, here in the United States, this would be a way that we could uh that we could uh wipe out the national debt by re-evaluating the gold spot price.
It it could happen because other if we're not doing that, there's no way for us to ever eliminate that uh 30 something trillion dollar debt.
Well, right.
I mean, gold it is kind of fascinating.
You know, one of the the big theory I remember back in the day uh was when basically America went off the gold standard.
There was this kind of weird expectation among people that gold was just going to bottom out to industrial prices, but frankly, that didn't happen.
It went in the exact opposite direction, right?
So gold has this very strange staying power.
I don't know if this is the reason for President's Trump particular fascination with it, but what what do you think?
Um I agree with it 100%.
And just talking about the Fed Reserve, if for people out there that might be seeing that Trump's been battling with the Fed Reserve chairman trying to get him out of there.
It's not a reserve.
So all it is is something that was put in place when we went off of the gold standard, which has been a little bit over 50 years ago.
And actually, it was last July that we really took a big big hit in America, and this didn't hit the main so-called mainstream media.
We went off of the petrodollar in July of last year.
Saudi Arabia's 50-year contract on the petrodollar ended in July, and they just chose to not renew it.
So technically, our dollar is not backed by anything real at this point.
I mean, we've we've sort of known that for a while.
And also it a news article came out this week where where the the foreign bank holdings now for gold exceed their treasury holdings.
That means that the foreign banks are no longer investing in the dollar.
They would prefer to invest in gold right now.
Well, no, and then in fact, I was just actually looking at a graph that actually speaks to this.
I mean, uh look there isn't a ton of trust in the euro either, or you know, even less, but there is this increased interest in gold as the place where people store value.
Yeah.
It's a it all the currencies out there for pretty much every country.
Many of these countries are like America where where they do have a big uh national debt or their currency just doesn't have the value anywhere close to other countries' currencies.
So it I believe that uh that the way that we spend money is about to change forever.
So we're probably gonna go to something digital.
Like for me, I like sports.
I go I live in Los Angeles, I go to Dodger Games.
They don't take cash there.
So you just people want to use their phone to pay for things.
So if we're gonna be doing that, why don't we have some sort of currency that that is digital that's based on something that's real, like gold and or silver, and uh and for people like us that own gold or silver, you're in on the ground floor on something that could really go only go up in value if the whole world is using it as a currency again.
You know, the reason that I shifted you know the holdings that I have into gold mostly is because I view it as a kind of a safe store, right?
And then so this is this is what's interesting.
I mean, it is at a record high price right now, but you know, generally you don't hear uh that you you want to buy high, right?
That generally you hear buy low, sell high, that kind of thing.
I'm not looking to buy and sell, I'm looking to have a place where I have safety.
Yeah, absolutely.
So so um talking about the idea of of buying high, okay.
Um I talk about gold a lot, but when I say that something, when I talk about gold, what's good for gold is great for silver.
And silver is something that's been heavily manipulated for years, meaning that uh that the big banks out there would not allow silver to break out of a 20 to 25 per ounce range.
So it would literally go from $20 an ounce to 25, back down to 20, up to 25, and just continue.
And and it was all these people were investing in silver, hoping that it could get back up to $50 an ounce, which is the all-time high, and uh and and exceed that at some point.
Even in 2011, silver hit 49 dollars an ounce, gold was $1,900 an ounce.
Today, gold is at $3,550 an ounce, and silver's at uh $41 an ounce.
So if you were to if you look at the ratio, silver should be a lot higher right now than it is.
But the good news for silver is that it has broken out of that $20 to $25 range and that the odds of it going past $50 an ounce and into an area that we've never seen it go before are very strong.
So at this point, I do like investing in silver with it being at a higher spot price than say before, because you people have waited years for it to break out of that $20 to $25 range.
So I think that for precious metals, it's now.
Well, no, and I I appreciate you clarifying around silver, because I always I always had this question in my mind why would I do silver, you know, at all, right?
I mean, I I'm very simple in this respect.
Okay, you have to forgive me here.
Yeah, yeah.
It's um one thing that that um people can do to own gold and silver is um people oftentimes will do a cash purchase.
And and when they contact us for a cash purchase, they um they go on our website, they fill out an online form, and uh they ask us to contact them.
And we do, and we're not super pushy.
We give people time to be able to speak with their family members, financial advisor, or even pray about it.
So we're not uh we're not gonna be rate somebody because they can't make a decision to make a purchase on a 10-minute phone call.
So it's um we've been doing this for a very long time.
But it's um people should reach out to us because they can roll over a portion of their retirement account to hold physical gold and silver that's stored at a third-party depository where it's fully insured, it's not stored at our office, and um and it's not a taxable event.
And these rollovers is that's what they're called, they they only take about 10 days to get going.
It's um we're having more people contact us now than in any time in the 40 years that I've been doing this.
Tell me a little bit more about this retirement aspect, because I'm also I I'm Canadian, we have our own system, right, of how things work.
Um how is give me the kind of the nuance of the distinction if you're putting it into a retirement type account versus just buying casually.
Okay, so it really it only works for the um US-based retirement accounts.
But if you have an IRA, say at uh Fidelity, okay, I'm just using them as an example.
And let's say you have 100,000 in that retirement account and you want to own gold and silver in that retirement account, then you would reach out to us, we'll help you do a rollover.
What happens is is we do an onboarding appointment with our IRA custodian, which is not Fidelity, and um our custodian will ask Fidelity to send, let's say if you're doing $20,000, you would they would send $20,000 over to our custodian.
Once it funds, okay, then we contact you and we say, hey, the $20,000's there.
Now it's time to get you some gold and silver.
Then we do the gold and silver Purchase and uh it's it's not considered a distribution, it's not a taxable event.
And now you have physical gold and silver that you can see on a quarterly statement or daily online at any given point.
If you live off of your retirement account or you pull from it regularly, you're able to do that.
All you have to do is either leave enough cash in it to do it or sell us back a little bit at a time.
People do both options.
And it does, it's not just IRAs.
If you have a 401k from a company that you no longer work at, or if you're currently working at a company that you do have a 401k and you're over 59 and a half, those can be rolled over.
You might have a government TSP account, an inherited IRA.
You can have a simple IRA, those can all be rolled over into precious metals IRAs.
And so, but you know what, what what is the let's say everybody were to listen to you?
What would that look like?
I love that question.
It's so earlier I mentioned that really only one to one to two percent of Americans understand this and understand how gold and silver can help their portfolio.
It's my estimate that if that were to somehow bump up to 10%, that that would probably wipe out all of the physical gold and silver that's available, and it would probably drive the price sky high.
It's um the people here don't really get it.
But it's um I'm trying I'm out there spreading the word, and and it's great because it's uh it's helped so many people over time.
I mean, I've had Beverly Hills Precious Metals since 2010.
And um, so for more than 15 full years, I've been helping people with uh retirement accounts and uh in like a call center format.
But prior to that, since 1985, it was my first job working in the coin business.
And I remember early on I couldn't understand why these uh men would walk in with wads of cash, trade cash for stacks of gold, and uh, I just remember asking uh the boss there, like, why would they want gold more than cash?
And he told me he said the cash isn't worth anything, it's just paper with numbers on it.
The gold is worth something.
And ever since then I got it.
Well, you know, I was uh chatting with Jeffrey Tucker, and one of the things we were talking about is coin stores.
And you know, something amazing about coin stores is that that they're actually kind of a these coins are a physical representation of of you know of actually a freedom of people's freedom of people being able to hold wealth themselves that they're in their own in their own hand in their own way.
There was a time when owning an actual $10 gold note or a $10 gold coin were the same because that the coins back the note.
But now that that is no longer the case.
So it's um to me, when when you invest in gold and silver, you're you are investing in history.
You're investing in part of what what made America such a great country.
And uh, and we're still a great country.
We just need to we need to revamp um how how we how we spend money.
And and it's it to me, gold and silver is where it's at.
Well, wonderful.
Listen, I I appreciate you taking the time.
And uh, you know, you as I said, you've come very, very well recommended.
And you know, I hope some of our viewers will have the chance to work with you.
Oh, me too.
Me too.
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