Thanks to Carmen Segarra, however, we now have some keen insight to the inner operations of the Federal Reserve System.

Segarra was recently employed at the New York Fed as a bank examiner, charged with ensuring the bank followed internal regulations and conducting “oversight” of the economic powerhouse. During her tenure, Segarra grew suspicious the Fed was rather lenient with powerful, well-connected investment banks — notably Goldman Sachs (a key player in the 2008 financial crisis). To document her concerns she recorded 46 hours of private meetings and conversations. Her recordings reveal the Fed is, in fact, rather cozy with the financial institutions it’s supposed to regulate.

With evidence in hand, Segarra voiced her objections.

She was soon fired.

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Qualche tempo fa, la Segarra è stata assunta dalla Fed di New York come esaminatore bancario, cioè con il compito di controllare che la banca seguisse tutti i regolamenti interni e di “supervisionare” questa centrale di potere economico. Durante il suo lavoro, la Segarra ha cominciato a sospettare una certa condiscendenza della Fed con le banche d’investimento che avevano buone amicizie; soprattutto la Goldman Sachs, protagonista chiave della crisi finanziaria nel 2008. Per confermare i suoi sospetti, ha registrato 46 ore di incontri privati e conversazioni. Le registrazioni rivelano un atteggiamento piuttosto accomodante della Fed con le istituzioni finanziarie che avrebbe dovuto controllare. Prove alla mano, la Segarra ha dato voce alla sua protesta. È stata subito licenziata.

La donna è andata ad aggiungersi ai ranghi di altri informatori e ha passato le registrazioni a Jake Bernstein, un giornalista investigativo di ProPublica, e al programma radiofonico This American Life. In un’intervista con l’emittente Npr, Bernstein nota: “Questa è gente che lavora dentro le banche. Incontra queste persone tutti i giorni, ha bisogno di informazioni dalle banche. È più facile ottenerle se si hanno amici e buone relazioni, ma a volte si scade nell’ossequio.” Le registrazioni rivelano molte cose, come gli accordi segreti definiti “oscuri” dagli stessi rappresentanti della Fed, e rivelano la cultura corrotta che regna nella banca centrale.

“Scadere nell’ossequio” non è il termine appropriato. Meglio chiamarlo furto. La popolazione è derubata della propria libertà di agire e della propria sicurezza. Un furto sotto forma di salvataggi bancari e di una politica economica basata sul “troppo grande per fallire”, a vantaggio del capitalismo di stato.

Dopo le rivelazioni, il senatore democratico Elizabeth Warren, del Massachusetts, ha invocato un’indagine sulla corruzione della Fed. Assieme a lei il suo collega democratico Sherrod Brown. Illusioni.

Sono tantissimi anni che le grandi aziende e il settore finanziario godono di privilegi economici garantiti dallo stato con la premessa che queste istituzioni sono indispensabili alla società. La finanza è separata ma allo stesso tempo legata profondamente allo stato. Questo significa che l’economia della nazione è connessa direttamente con queste istituzioni. Questi legami danno forza ad un’economia politica corporativa in cui lo stato ha interesse diretto a far sì che queste concentrazioni di capitale, oggi definite “troppo grandi per fallire”, abbiano successo. Se vuole conservarsi in salute, lo stato deve garantire la stabilità del capitalismo.

Le normative appaiono così come uno spreco di tempo, energie e denaro pubblico.

Noi che apparteniamo alla sinistra di mercato siamo contrari a queste concentrazioni di potere e capitali, che in primo luogo permettono l’esistenza di istituzioni “troppo grandi per fallire”. Crediamo che spetti al potere della società, liberato dalla simbiosi stato-capitale, guidare il mercato. Immaginiamo un sistema economico e di governance decentralizzato e partecipativo. In una società basata sulla libertà personale e di associazione non c’è posto per il potere.

Chi è a capo della Fed, così come gli altri presunti controllori, crede di poter programmare l’economia. Il loro problema è che il mercato, come tutto ciò che dipende dal comportamento umano, non è fatto per essere programmato: il mercato è spontaneo. La volontà di controllare l’economia porta necessariamente all’ingabbiamento dell’attività umana e dell’innovazione. In un mercato liberato, al contrario, il potere sarebbe diffuso tra tutti, e questo richiederebbe libertà di agire e di seguire le proprie inclinazioni. È tempo di chiudere la Fed e di mettere in pratica un’economia basata sulla libertà.

Traduzione di Enrico Sanna.

Segarra was recently employed at the New York Fed as a bank examiner, charged with ensuring the bank followed internal regulations and conducting “oversight” of the economic powerhouse. During her tenure, Segarra grew suspicious the Fed was rather lenient with powerful, well-connected investment banks — notably Goldman Sachs (a key player in the 2008 financial crisis). To document her concerns she recorded 46 hours of private meetings and conversations. Her recordings reveal the Fed is, in fact, rather cozy with the financial institutions it’s supposed to regulate. With evidence in hand, Segarra voiced her objections. She was soon fired.

Segarra joined the ranks of other whistle-blowers and leaked her recordings to Jake Bernstein, an investigative reporter from ProPublica, and to the public radio program, This American Life. In an interview with NPR, Bernstein notes: “These are people who work inside the banks. They see these people every day, and they need to obtain the information from these banks, and it’s easier to obtain the information if you’re friendly and if you have a good relationship, but sometimes that can slide to deference.” The tapes reveal much, such as back-room deals described as “shady” by Fed officials, but at their heart, the recordings tell the story of a corrupt culture within the central bank.

A “slide to deference” is not the proper description. Theft is more accurate. The theft of labor, property and security from the populace, in the form of bailouts and “too big to fail” economic policy, for the benefit of the state capitalist system.

Because of the leaks, US Senator Elizabeth Warren (D-MA) is trumpeting the call for a corruption investigation into the Fed. She is joined by her Democratic colleague Sherrod Brown. Such calls are folly.

State-sanctioned economic privilege has long been granted to big business and the financial sector under the premise that these institutions are necessary for social organization. The financial sector is separate from, but intimately related with, the state. As such, the economy of the nation-state is directly linked to these institutions. This relationship forges a corporatist political economy where the state has direct interest in the success of these now “too big to fail” concentrations of capital — the state must keep capitalism stable for its own preservation..

Regulation is thus a waste of time, energy and taxpayer dollars.

Those of us on the market left, however, oppose the very concentrations of power and capital that allow “too big to fail” institutions to exist in the first place. We believe social power, liberated of state-capital symbiosis, should steer the market. We envision decentralized and participatory systems of governance and economics. There is no room for archism in a social order of liberty and free association.

Those that head the Fed, and other would-be regulators, imagine they can design economic systems. The problem is markets, like all human behavior, are not structured for the command and control mentality — markets are spontaneous. The desire for control of economic systems necessarily requires the restriction of human labor and innovation. The liberated market, in contrast, with power diffused to the public arena, requires liberty and the inclined labor of human-beings. It’s far past time we end the Fed and actualize the economics of liberty.

Translations for this article:

• Italian, Chiudete la Fed: L’Economia della Libertà.

In Kim Stanley Robinson’s epic 1993 sci-fi novel Red Mars, a pioneering group of scientists establish a colony on Mars. Some imagine it as a chance for a new life, run on entirely different principles from the chaotic Earth. Over time, though, the illusion is shattered as multinational corporations operating under the banner of governments move in, viewing Mars as nothing but an extension to business-as-usual.

It is a story that undoubtedly resonates with some members of the Bitcoin community. The vision of a free-floating digital cryptocurrency economy, divorced from the politics of colossal banks and aggressive governments, is under threat. Take, for example, the purists at Dark Wallet, accusing the Bitcoin Foundation of selling out to the regulators and the likes of the Winklevoss Twins.

Bitcoin sometimes appears akin to an illegal immigrant, trying to decide whether to seek out a rebellious existence in the black-market economy, or whether to don the slick clothes of the Silicon Valley establishment. The latter position – involving publicly accepting regulation and tax whilst privately lobbying against it – is obviously more acceptable and familiar to authorities.

Of course, any new scene is prone to developing internal echo chambers that amplify both commonalities and differences. While questions regarding Bitcoin’s regulatory status lead hyped-up cryptocurrency evangelists to engage in intense sectarian debates, to many onlookers Bitcoin is just a passing curiosity, a damp squib that will eventually suffer an ignoble death by media boredom. It is a mistake to believe that, though. The core innovation of Bitcoin is not going away, and it is deeper than currency.

What has been introduced to the world is a method to create decentralised peer-validated time-stamped ledgers. That is a fancy way of saying it is a method for bypassing the use of centralised officials in recording stuff. Such officials are pervasive in society, from a bank that records electronic transactions between me and my landlord, to patent officers that record the date of new innovations, to parliamentary registers noting the passing of new legislative acts.

The most visible use of this technical accomplishment is in the realm of currency, though, so it is worth briefly explaining the basics of Bitcoin in order to understand the political visions being unleashed as a result of it.

The technical vision 1.0

Banks are information intermediaries. Gone are the days of the merchant dumping a hoard of physical gold into the vaults for safekeeping. Nowadays, if you have ‘£350 in the bank’, it merely means the bank has recorded that for you in their data centre, on a database that has your account number and a corresponding entry saying ‘350’ next to it. If you want to pay someone electronically, you essentially send a message to your bank, identifying yourself via a pin or card number, asking them to change that entry in their database and to inform the recipient’s bank to do the same with the recipient’s account.

Thus, commercial banks collectively act as a cartel controlling the recording of transaction data, and it is via this process that they keep score of ‘how much money’ we have. To create a secure electronic currency system that does not rely on these banks thus requires three interacting elements. Firstly, one needs to replace the private databases that are controlled by them. Secondly, one needs to provide a way for people to change the information on that database (‘move money around’). Thirdly, one needs to convince people that the units being moved around are worth something.

To solve the first element, Bitcoin provides a public database, or ledger, that is referred to reverently as the blockchain. There is a way for people to submit information for recording in the ledger, but once it gets recorded, it cannot be edited in hindsight. If you’ve heard about bitcoin ‘mining’ (using ‘hashing algorithms’), that is what that is all about. A scattered collective of mercenary clerks essentially hire their computers out to collectively maintain the ledger, baking (or weaving) transaction records into it.

Secondly, Bitcoin has a process for individuals to identify themselves in order to submit transactions to those clerks to be recorded on that ledger. That is where public-key cryptography comes in. I have a public Bitcoin address (somewhat akin to my account number at a bank) and I then control that public address with a private key (a bit like I use my private pin number to associate myself with my bank account). This is what provides anonymity.

The result of these two elements, when put together, is the ability for anonymous individuals to record transactions between their bitcoin accounts on a database that is held and secured by a decentralised network of techno-clerks (‘miners’). As for the third element – convincing people that the units being transacted are worth something – that is a more subtle question entirely that I will not address here.

The political vision 1.0

Note the immediate political implications. Within the Bitcoin system, a set of powerful central intermediaries (the cartel of commercial banks, connected together via the central bank, underwritten by government), gets replaced with a more diffuse network intermediary, apparently controlled by no-one in particular.

This generally appeals to people who wish to devolve power away from banks by introducing more diversity into the monetary system. Those with a left-wing anarchist bent, who perceive the state and banking sector as representing the same elite interests, may recognise in it the potential for collective direct democratic governance of currency. It has really appealed, though, to conservative libertarians who perceive it as a commodity-like currency, free from the evils of the central bank and regulation.

The corresponding political reaction from policy-makers and establishment types takes three immediate forms. Firstly, there are concerns about it being used for money laundering and crime (‘Bitcoin is the dark side’). Secondly, there are concerns about consumer protection (‘Bitcoin is full of cowboy operators’). Thirdly, there are concerns about tax (‘this allows people to evade tax’).

The general status quo bias of regulators, who fixate on the negative potentials of Bitcoin whilst remaining blind to negatives in the current system, sets the stage for a political battle. Bitcoin enthusiasts, passionate about protecting the niche they have carved out, become prone to imagining conspiratorial scenes of threatened banks fretfully lobbying the government to ban Bitcoin, or of paranoid politicians panicking about the integrity of the national currency.

The technical vision 2.0

Outside the media hype around these Bitcoin dramas, though, a deeper movement is developing. It focuses not only on Bitcoin’s potential to disrupt commercial banks, but also on the more general potential for decentralised blockchains to disrupt other types of centralised information intermediaries.

Copyright authorities, for example, record people’s claims to having produced a unique work at a unique date and authoritatively stamp it for them. Such centralised ‘timestamping’ more generally is called ‘notarisation’. One non-monetary function for a Bitcoin-style blockchain could thus be to replace the privately controlled ledger of the notary with a public ledger that people can record claims on. This is precisely what Proof of Existence and Originstamp are working on.

And what about domain name system (DNS) registries that record web addresses? When you type in a URL like www.e-ir.info, the browser first steers you to a DNS registry like Afilias, which maintains a private database of URLs alongside information on which IP address to send you to. One can, however, use a blockchain to create a decentralised registry of domain name ownership, which is what Namecoin is doing. Theoretically, this process could be used to record share ownership, land ownership, or ownership in general (see, for example, Mastercoin’s projects).

The biggest information intermediaries, though, are often hidden in plain sight. What is Facebook? Isn’t it just a company that you send information to, which is then stored in their database and subsequently displayed to you and your friends? You log in with your password (proving your identity), and then can alter that database by sending them further messages (‘I’d like to delete that photo’). Likewise with Twitter, Dropbox, and countless other web services.

Unlike the original internet, which was largely used for transmission of static content, we experience sites like Facebook as interactive playgrounds where we can use programmes installed in some far away computer. In the process of such interactivity, we give groups like Facebook huge amounts of information. Indeed, they set themselves up as information honeytraps in order to create a profit-making platform where advertisers can sell you things based on the information. This simultaneously creates a large information repository for authorities like the NSA to browse. This interaction of corporate power and state power is inextricably tied to the profitable nature of centrally held data.

But what if you could create interactive web services that did not revolve around single information intermediaries like Facebook? That is precisely what groups like Ethereum are working towards. Where Bitcoin is a way to record simple transaction information on a decentralised ledger, Ethereum wants to create a ‘decentralised computational engine’. This is a system for running programmes, or executing contracts, on a blockchain held in play via a distributed network of computers rather than Mark Zuckerberg’s data centres.

It all starts to sounds quite sci-fi, but organisations like Ethereum are leading the charge on building ‘Decentralised Autonomous Organisations’, hardcoded entities that people can interact with, but that nobody in particular controls. I send information to this entity, triggering the code and setting in motion further actions. As Bitshares describes it, such an organisation “has a business plan encoded in open source software that executes automatically in an entirely transparent and trustworthy manner.”

The political vision 2.0

By removing a central point of control, decentralised systems based on code – whether they exist to move Bitcoin tokens around, store files, or build contracts – resemble self-contained robots. Mark Zuckerberg of Facebook or Jamie Dimon of JP Morgan Chase are human faces behind the digital interface of the services they run. They can overtly manipulate, or bow in to pressure to censor. A decentralised currency or a decentralised version of Twitter seems immune from such manipulation.

It is this that gives rise to a narrative of empowerment and, indeed, at first sight this offers an exhilarating vision of self-contained outposts of freedom within a world otherwise dominated by large corruptible institutions. At many cryptocurrency meet-ups, there is an excitable mix of techno-babble infused with social claims. The blockchain can record contracts between free individuals, and if enforcement mechanisms can be coded in to create self-enforcing ‘smart contracts’, we have a system for building encoded law that bypasses states.

Bitcoin and other blockchain technologies, though, are empowering right now precisely because they are underdogs. They introduce diversity into the existing system and thereby expand our range of tools. In the minds of hardcore proponents, though, blockchain technologies are more than this. They are a replacement system, superior to existing institutions in every possible way. When amplified to this extreme, though, the apparently utopian project can begin to take on a dystopian, conservative hue.

Binary politics

When asked about why Bitcoin is superior to other currencies, proponents often point to its ‘trustless‘ nature. No trust needs be placed in fallible ‘governments and corporations’. Rather, a self-sustaining system can be created by individuals following a set of rules that are set apart from human frailties or intervention. Such a system is assumed to be fairer by allowing people to win out against those powers who can abuse rules.

The vision thus is not one of bands of people getting together into mutualistic self-help groups. Rather, it is one of individuals acting as autonomous agents, operating via the hardcoded rules with other autonomous agents, thereby avoiding those who seek to harm their interests.

Note the underlying dim view of human nature. While anarchist philosophers often imagine alternative governance systems based on mutualistic community foundations, the ‘empowerment’ here does not stem from building community ties. Rather it is imagined to come from retreating from trust and taking refuge in a defensive individualism mediated via mathematical contractual law.

It carries a certain disdain for human imperfection, particularly the imperfection of those in power, but by implication the imperfection of everyone in society. We need to be protected from ourselves by vesting power in lines of code that execute automatically. If only we can lift currency away from manipulation from the Federal Reserve. If only we can lift Wikipedia away from the corruptible Wikimedia Foundation.

Activists traditionally revel in hot-blooded asymmetric battles of interest (such as that between StrikeDebt! and the banks), implicitly holding an underlying faith in the redeemability of human-run institutions. The Bitcoin community, on the other hand, often seems attracted to a detached anti-politics, one in which action is reduced to the binary options of Buy In or Buy Out of the coded alternative. It echoes consumer notions of the world, where one ‘expresses’ oneself not via debate or negotiation, but by choosing one product over another. We’re leaving Earth for Mars. Join if you want.

It all forms an odd, tense amalgam between visions of exuberant risk-taking freedom and visions of risk-averse anti-social paranoia. This ambiguity is not unique to cryptocurrency (see, for example, this excellent parody of the trustless society), but in the case of Bitcoin, it is perhaps best exemplified by the narrative offered by Cody Wilson in Dark Wallet’s crowdfunding video. “Bitcoin is what they fear it is, a way to leave… to make a choice. There’s a system approaching perfection, just in time for our disappearance, so, let there be dark”.

The myth of political ‘exit’

But where exactly is this perfect system Wilson is disappearing to?

Back in the days of roving bands of nomadic people, the political option of ‘exit’ was a reality. If a ruler was oppressive, you could actually pack up and take to the desert in a caravan. The bizarre thing about the concept of ‘exit to the internet’ is that the internet is a technology premised on massive state and corporate investment in physical infrastructure, fibre optic cables laid under seabeds, mass production of computers from low-wage workers in the East, and mass affluence in Western nations. If you are in the position to be having dreams of technological escape, you are probably not in a position to be exiting mainstream society. You are mainstream society.

Don’t get me wrong. Wilson is a subtle and interesting thinker, and it is undoubtedly unfair to suggest that he really believes that one can escape the power dynamics of the messy real world by finding salvation in a kind of internet Matrix. What he is really trying to do is to invoke one side of the crypto-anarchist mantra of ‘privacy for the weak, but transparency for the powerful’.

That is a healthy radical impulse, but the conservative element kicks in when the assumption is made that somehow privacy alone is what enables social empowerment. That is when it turns into an individualistic ‘just leave me alone’ impulse fixated with negative liberty. Despite the rugged frontier appeal of the concept, the presumption that empowerment simply means being left alone to pursue your individual interests is essentially an ideology of the already-empowered, not the vulnerable.

This is the same tension you find in the closely related cypherpunk movement. It is often pitched as a radical empowerment movement, but as Richard Boase notes, it is “a world full of acronyms and codes, impenetrable to all but the most cynical, distrustful, and political of minds.” Indeed, crypto-geekery offers nothing like an escape from power dynamics. One merely escapes to a different set of rules, not one controlled by ‘politicians’, but one in the hands of programmers and those in control of computing power.

It is only when we think in these terms that we start to see Bitcoin not as a realm ‘lacking the rules imposed by the state’, but as a realm imposing its own rules. It offers a form of protection, but guarantees nothing like ‘empowerment’ or ‘escape’.

Techno-Leviathan

Technology often seems silent and inert, a world of ‘apolitical’ objects. We are thus prone to being blind to the power dynamics built into our use of it. For example, isn’t email just a useful tool? Actually, it is highly questionable whether one can ‘choose’ whether to use email or not. Sure, I can choose between Gmail or Hotmail, but email’s widespread uptake creates network effects that mean opting out becomes less of an option over time. This is where the concept of becoming ‘enslaved to technology’ emerges from. If you do not buy into it, you will be marginalised, and that is political.

This is important. While individual instances of blockchain technology can clearly be useful, as a class of technologies designed to mediate human affairs, they contain a latent potential for encouraging technocracy. When disassociated from the programmers who design them, trustless blockchains floating above human affairs contains the specter of rule by algorithms. It is a vision (probably accidently) captured by Ethereum’s Joseph Lubin when he says “There will be ways to manipulate people to make bad decisions, but there won’t be ways to manipulate the system itself”.

Interestingly, it is a similar abstraction to that made by Hobbes. In his Leviathan, self-regarding people realise that it is in their interests to exchange part of their freedom for security of self and property, and thereby enter into a contract with a Sovereign, a deified personage that sets out societal rules of engagement. The definition of this Sovereign has been softened over time – along with the fiction that you actually contract to it – but it underpins modern expectations that the government should guarantee property rights.

Conservative libertarians hold tight to the belief that, if only hard property rights and clear contracting rules are put in place, optimal systems spontaneously emerge. They are not actually that far from Hobbes in this regard, but their irritation with Hobbes’ vision is that it relies on politicians who, being actual people, do not act like a detached contractual Sovereign should, but rather attempt to meddle, make things better, or steal. Don’t decentralised blockchains offer the ultimate prospect of protected property rights with clear rules, but without the political interference?

This is essentially the vision of the internet techno-leviathan, a deified crypto-sovereign whose rules we can contract to. The rules being contracted to are a series of algorithms, step by step procedures for calculations which can only be overridden with great difficulty. Perhaps, at the outset, this represents, à la Rousseau, the general will of those who take part in the contractual network, but the key point is that if you get locked into a contract on that system, there is no breaking out of it.

This, of course, appeals to those who believe that powerful institutions operate primarily by breaching property rights and contracts. Who really believes that though? For much of modern history, the key issue with powerful institutions has not been their willingness to break contracts. It has been their willingness to use seemingly unbreakable contracts to exert power. Contracts, in essence, resemble algorithms, coded expressions of what outcomes should happen under different circumstances. On average, they are written by technocrats and, on average, they reflect the interests of elite classes.

That is why liberation movements always seek to break contracts set in place by old regimes, whether it be peasant movements refusing to honour debt contracts to landlords, or the DRC challenging legacy mining concessions held by multinational companies, or SMEs contesting the terms of swap contracts written by Barclays lawyers. Political liberation is as much about contesting contracts as it is about enforcing them.

Building the techno-political vision 3.0

The point I am trying to make is that you do not escape the world of big corporates and big government by wishing for a trustless set of technologies that collectively resemble a technocratic crypto-sovereign. Rather, you use technology as a tool within ongoing political battles, and you maintain an ongoing critical outlook towards it. The concept of the decentralised blockchain is powerful. The cold, distrustful edge of cypherpunk, though, is only empowering when it is firmly in the service of creative warm-blooded human communities situated in the physical world of dirt and grime.

Perhaps this means de-emphasising the focus on how blockchains can be used to store digital assets or property, and focusing rather on those without assets. For example, think of the potential of blockchain voting systems that groups like Restart Democracy are experimenting with. Centralised vote-counting authorities are notorious sources of political anxiety in fragile countries. What if the ledger recording the votes cast was held by a decentralised network of citizens, with voters having a means to anonymously transmit votes to be stored on a publicly viewable database?

We do not want a future society free from people we have to trust, or one in which the most we can hope for is privacy. Rather, we want a world in which technology is used to dilute the power of those systems that cause us to doubt trust relationships. Screw escaping to Mars.

The Ex-Im Bank epitomizes just the kind of unashamed corporate welfare that animates populist hostilities on both the American political right and left, the collusive cronyism that — whatever their rhetoric — establishment elites of both sides embrace with enthusiasm. The Democrat and Republican halves of the Washington political machine each have their own cynical uses for populist moods, but when the chips are down and the votes are cast American capitalism just is the active collaboration of powerful interests in big business and government. We have never had a free market in the United States, nothing even remotely close.

Agencies like the Ex-Im Bank redistribute wealth from ordinary taxpayers to the political chosen, mammoth corporations such as Boeing that couldn’t survive for a single day without constant, committed intervention from the American state. In 2010, nearly half of all Ex-Im Bank loans and loan guarantees went to that most favorite of aerospace giants, a year in which the company saw over $64 billion in revenue. So much for the oft-repeated propaganda about supporting small businesses. The Ex-Im Bank exists to ensure that the biggest companies, well-connected with lawmakers and regulators, never actually have to so much as think about competing in a hypothetical “free market system.”

Beyond Boeing, top clients of the cronyist Bank include General Electric, Caterpillar, and KBR, the notoriously corrupt former Halliburton subsidiary that has devoured hundreds of millions of dollars in government contracts. While it’s difficult to know exactly how much risk taxpayers are exposed to until, for example, a default actually occurs, the Congressional Budget Office recently poked holes in some of the Bank’s numbers. In a report this month (May 2014), the CBO said that under “fair-value” accounting — rather than the accounting method prescribed by the Federal Credit Reform Act — the Bank will cost taxpayers $2 billion over the next decade.

That’s just what we can see. We have no idea what free people making voluntary exchanges might do with those resources were they not tied up in the coercive, statist game of American capitalism. Advocates of individual rights and open competition, market anarchists distinguish between capitalism as it now exists, and has in fact always existed, and legitimate free markets.

Indeed, we use the term “freed markets” to signify that people have never yet been free from the tethers of state control within the economy. Real freed markets, without handouts to big business and incalculable other interventions, would distribute private property more widely and evenly, eroding the power and market share of the United States’ corporate titans.

The politically powerful devotedly serve the economically powerful — and the reverse is no less true. The Ex-Im Bank is just one of countless examples of big business courting the federal government, seeking and cultivating favorable public policy as a means of avoiding the discomfort of competition. In contrast, the kind of free competition that market anarchists favor is not at all antithetical to concerns about social and economic justice.

We see the goals of freedom and equality as mutually reinforcing. The imposition of the state against free people and their voluntary organizations is not protective but predatory, pitting people against each other in a fight to control the state. Agencies like the Ex-Im Bank are the illegitimate result of that ongoing fight. Perhaps it’s time to try this free market we keep hearing so much about.

Arguably the most powerful person in the United States (even rivaling the POTUS), Ben S. Bernanke, has left the Federal Reserve. Since 2006 he has sought to make the economy his marionette. Fed policies, under his direction, worked to manage a collapsed housing market, busted mortgage industry and the 2008 global financial crisis – a manufactured crisis of the command and control mentality over the “free” market. Bernanke engineered perhaps the largest redistribution of wealth in American (if not world) history with massive bailouts given to the financial sector – money stolen from the labor of millions and given to the “too big to fail” economic elite. Aside from the initial 700 billion dollar bailout, a Federal Reserve audit revealed the central bank provided a whopping 16 trillion in secret aid to support the corporate state apparatus. Bernanke has released his reign, transferring power to the first woman in United States history to head the Fed: Janet Yellen.

Yellen was confirmed by the United States Senate on January 6, 2014, further committing Washington to even more Keynesian policies from the central bank. As a Fed official, Yellen was a great advocate of keeping interest rates artificially close to zero, increased government spending, and the controversial Quantitive Easing measures sought by the Fed to direct the American economy. Her rise to power will continue to favor the corporate state, even with rumors of economic growth.

There have been numerous libertarian/Libertarian arguments against the central bank. It is not my wish to re-invent the wheel. Most of these arguments, however, stem from the political right – most notably Ron Paul and even greater arguments from his mentor, Murray Rothbard. There is surprisingly little noise from the traditional left – the libertarian or market left - about the central bank, however. Even the famous American leftist and anarcho-syndicalist/libertarian-socialist Noam Chomsky supports central banking. Rather than re-invent the wheel, with this essay I hope to add to the small but sound left-libertarian opposition to the Federal Reserve.

A Brief History of Central Banking in the United States

Alexander Hamilton, the first Secretary of the Treasury, was among the first American politicians to argue for, and help develop, a central bank. Hamilton thought it would be irresponsible to place much democratic or economic control in the hands of the American populace. Hamilton and other federalists believed the country should be ruled by the economic ruling class – the elite, the educated and the privileged. Federalist John Jay put it as bluntly as possible: “Those who own the country ought to govern it.” Hamilton and company favored a strong national government, a broad interpretation of the constitution and put national unity above individualism and states rights. Their economic model, of course, was centrally planned with strict regulation of state economies. From this mindset the first central bank was born in 1791.

Hamilton’s bank, the First Bank of the United States, was kept out of the public arena and operated as a private financial institution. Hamilton’s main argument for the First Bank was that it would help repay the new nations war debt (Morgan 2012). Throughout its existence, however, the bank was met with popular backlash. Objections to the Federal Reserve today echo what was argued against the First Bank: It served moneyed interests (northern corporations), was a threat to property rights and restricted real economic growth (Morgan 2012). Some politicians of the time, notably Thomas Jefferson and James Madison, argued the bank was unconstitutional, that only congress, not a private bank, had the power to tax and print money. In 1811 the Bank was deconstructed as congress voted not to renew its charter (Morgan 2012).

In 1812 the United States found itself in the midst of another war and more national debt.  To deal with a growing financial crisis, Congress voted to charter the (larger) Second Bank of the United States. The Second Bank, at the moment of inception, was poorly managed (Scur 1960). A year and a half after it opened it almost collapsed, and would have, if not for Langdon Cheves. Cheves was the second president of the new central bank and effectively administered its operations. Still, popular sentiment about such a powerful, private institution raised concerns about the Second Banks existence (Scur 1960). This sentiment, and Andrew Jackson’s political clout, would ultimately dissolve this Second Bank in 1836.

The United States was free of central banking until yet another major war erupted. The Civil War, and the need to pay for it, again began the quest for a National Bank. In 1863 the “national banking system” (not a central bank) was developed (MFED 2013). The new banking system, with a national charter, dictated that banks had to issue government-printed bills for their own notes, these notes had to be backed by federal bonds – the war effort was funded (Sylla 1969). In 1865, as the war waged on between the industrialized North and the agricultural South, state bank notes were taxed out of existence – a uniform national currency was established in the United States for the first time (MFED 2013).

With the civil war financed and “won” by the Union, and with a uniform currency, the United States experienced a bank panic in every decade afterward (MFED 2013), ah,”The Gilded Age.” Economic panic began in 1873 due to runs on the free banking system. A “run” occurs when a large number of customers pull their money from banks (MFED 2013). The runs would lead to more and more folks withdrawing their money, causing a system wide economic panic. With the depression of 1893, the Spanish-American War of 1898 and the deep recession of 1907, banking moguls and the United States Government again sought the establishment of a central bank (Sylla 1969), as opposed to letting the market equilibrate.

What followed was a series of Congressional acts that led to the establishment of the Federal Reserve Bank. The Aldrich-Vreeland Act of 1908 established the National Monetary Commission, charged with managing the nations finances, which called for government intervention in the economy, via currency development, during times of financial crisis (MFED 2013). The election of Democrat Woodrow Wilson brought with it the Federal Reserve Act of 1913, and American involvement in World War I. The Federal Reserve System was designed to be a government (not public) institution. The new central banking system was to work closely with the United States Treasury.

What followed the establishment of the Federal Reserve, after WWI, was the roaring twenties, further industrialization, the Great Depression, World War II, The New Deal, the rise of Keynesianism, explicit fiat currency, multiple recessions, the Korean War, the Vietnam War, multiple military interventions overseas, neoliberalism, the rise, fall and decay of the middle class, booms and busts, economic bubbles, artificial scarcity, artificial abundance and much more. In the wake of such history, the Federal Reserve has operated independently of the political process (MFED 2013). The Fed has become an independent centralized bank that is utilized to manage, and some would argue control, the United States economy.

The history of central banking is wrought with military conflict and depressed markets. States have long ignored moral objections to war, but economic restrictions have often halted violence. The printing press, however, allows governments to side step these restrictions. The century of the Fed has been a century of perpetual warfare. As Randolph Bourne wrote, shortly after the creation of the Federal Reserve, “war is the health of the state.” Central banking, Keynesian policies, and states are indeed dependent on jingoism and war. For in war governments flourish – allegiance to state blossoms, class struggle is stilled, spending keeps flowing, and worst of all, human beings, millions of us, die. Liberty is fundamentally opposed to this aggression, as noted here, by Anthony Gregory.

Sadly, as attributed to Nixon: “We are all Keynesians now.”

Liberty and the “Progressive Era”

United States history, like all history, can be defined as a race between social power and state power. It is outside the realm of this essay to describe all of the liberation movements that, in some context, sought the liberty of the true market form. Rather than try I will focus on the Progressive Era, which birthed the Federal Reserve.

The end of the Gilded Age was a period of great turmoil. It was good for business, the political class and those with a monopoly on capital, but the working class, people of color, women, political feminists, labor organizers, etc, realized they could not count on the national government to take their concerns, rights or liberty seriously. The Progressive Era did begin the Age of Reform, but this reform was not enacted to elevate the populace. Instead, reform was used to quiet popular uprisings, democratic social movements, and civil liberties – it was not intended to make fundamental changes to the established order (Zinn 2003).

The era has been termed “Progressive” because of the sheer number of laws that were passed. Upton Sinclair‘s “The Jungle” sparked a labor movement that accomplished passing the Meat Inspection Act, social movements engaged the system to pass the Hepburn Act which supported labor in railroads and pipelines (Zinn 2003), to name just a couple. Particular to the Federal Reserve, Woodrow Wilson’s presidency established the Federal Trade Commission and the Central Bank(s) itself. This was polished as progressive reform to control the growth of monopolies and to regulate the country’s money and banking system. Neither happened, in fact, power and influence of Wall Street only began to grow amidst giant surges of patriotism due to rising conflicts overseas. As noted by Emma Goldman (on patriotism and allegiance to government):

But when the smoke was over, the dead buried, and the cost of the war came back to the people in an increase in the price of commodities and rent-that is, when we sobered up from our patriotic spree-it suddenly dawned on us  … that the lives, blood, and money of the American people were used to protect the interests of the American capitalists.

Due to the work of early American libertarians such as Josiah Warren, Benjamin Tucker, Voltairine de Cleyre, Emma Goldman and others, movements developed that questioned the concentration of power. The labor movement began picking up steam and the marginalized voices in society were becoming amplified. It is true that working people benefited from some of the reforms of the Progressive Era – but the reforms protected the political and economic class from working people, giving just enough to stem off a major rebellion (Zinn 2003). A middle class cushion was manufactured to stem off class conflict as Howard Zinn (2003) explains:

Fundamental conditions did not change, however, for the vast majority of tenant farmers, factory workers, slum dwellers, miners, farm laborers, working men and women, black and white. Robert Wiebe sees in the Progressive movement an attempt by the system to adjust to changing conditions in order to achieve more stability. ‘Through rules with impersonal sanctions, it sought continuity and predictability in a world of endless change. It assigned far greater power to government . .. and it encouraged the centralization of authority.’ Harold Faulkner concluded that this new emphasis on strong government was for the benefit of ‘the most powerful economic groups.’

With the help of the Federal Reserve, Wall Street was able to take firm control of the political system. The market, as it existed, was not able to disperse protests at the grassroots level (Zinn 2003). The economic ruling class championed these reforms, to stabilize the state capitalist system in a time of uncertainty (Zinn 2003). These reforms gave rise to the corporation state that exists today. As noted by individualist anarchist Benjamin Tucker: “Laissez Faire was very good sauce for the goose, labor, but was very poor sauce for the gander, capital.”

Social power is still racing against state power.

The Liberated Market

Enter, Janet Yellen, a grand proponent of quantitative easing in a depressed economy. The Federal Reserve, under her leadership, will continue to serve the politically connected and do very little for the average American. Even Andrew Huszar, an ex-Fed official, in a piece for the Wall Street journal described the programs Yellen champions as the “greatest backdoor Wall Street bailout of all time.”

For all the discussion in the United States today about the proper function and role of our federal government, how to manage the economy, how to battle poverty, how to create jobs and so on and so on, what seems to be missing from national discussion is the true beauty of markets. A banking system, or piece of economic legislation, cannot fix the economy.

Economic systems are developed by the spontaneous order of society. The market is a product of inclined labor, derived from the dreams, aspirations, desires, passions and activities of free people. The market encompasses our places of exchange, but also the rest of human labor – social movements, federations, institutions, decision-making and all of human activity. This behavior cannot be managed from a centralized authority. The work of human beings, our inclined, creative labor, cannot be directed – it can only be realized in liberty.  The liberated market mechanism is the only cure for our past, current and future ills.

Today, in the era of too big to fail, it is corporate monopolies and financial institutions that benefit from the public. As George W. Bush said: “I have abandoned free market principles to save the free market.” What he meant was: “I have again exploited the middle and working classes to serve our economic ruling class.” While Bernanke, with the power of the Federal Reserve, was redistributing wealth to the upper tiers of society, organized people, from a diverse history of social movements, began developing the tools for market liberation.

The true market form, how people engage their labor, exists outside of the state.  The market left speaks of exchange and labor in human terms. The liberated market allows for economic, social and environmental justice. Liberation champions a society that allows the free flow of information, science and progress, democratic values, and the fruits of  labor so these principles can spread without restriction. The liberated market allows us to determine how great we can be. The liberated, free(d) market allows plans by the many, not by the few – it renders Yellen, Bernanke and all bureaucrats of the political class obsolete.

With booms and big busts, giant bubbles, manipulation of the market, a giant national debt and a decaying dollar accompanying promises in future spending, a full economic collapse of the United States government is a very real possibility (see Thomas L. Knapp: Government Spending: Two Steps Sideways, One Half-Step Back). This is scary, we all live here, we all have families here, we all have bills to pay and mouths to feed. Our way of life, however, is not at the mercy of the Federal Reserve or a conglomerate of folks in Washington. Though this realization is indeed scary, it should also be exciting. The market will finally have a chance to equilibrate. As witnessed in Detroit, free people can accomplish much with very little – and free people are already working on the solutions.

If we are to be serious about living in a peaceful and prosperous society, then we must also be serious about competing forms of currency, competing markets and the abandonment of the command and control mentality. Perhaps the Keynesians are right and government spending is the only way to prevent the collapse of state capitalism. What’s ignored by fans of the printing press is that state capitalism is unsustainable. If we all march off to battle there will be full employment, but nothing to eat. The only way out is the liberated market. In the words of Kevin Carson: “In the end we’ve got to find some way off the hamster wheel.”

Instead, may we work together and exchange services to co-ordinate and cultivate markets. The emergence of peer to peer currency, like Bitcoin, and the rise of voluntary exchange are sources of hope. The more we work around traditional power structures, the more we advance social power in our all too important race against the corporate state.

The creative labor of human beings will build markets, mutual aid, relief, decent societies and finally peace.  We can and will build a real and lasting peace that will make life on Earth worth living — a peace for every child of humanity. Free human beings will no longer die for governments and/or capital. The greatest moment in human civilization is within our grasp. It is time we reach out and attain liberty.

As Yellen continues, perhaps even enhances, the disastrous policies of the Fed, may we find solace and peace in the liberated market. May we soon, in liberty, say triumphantly: “We are all Agorists now.”

References:

Chandavarkar, Anand G. Keynes and Central Banking. Indian Economic Review / Volume XX, No.2

Federal Reserve Bank of Minneapolis. (2013) A History of Central Banking in the United States.  http://www.minneapolisfed.org/community_education/student/centralbankhistory/bank.cfm

Morgan, H. Wayne. (1956) The Origins and Establishment of the First Bank of the United States. Business History Review / Volume 30 / Issue 04 / December 1956, pp 472-492

Scur, Leon M. (1960) The Second Bank of the United States and Inflation After the War of 1812. Journal of Political Economy/Volume 68, No. 2

Sylla, Richard (1969). Federal Policy, Banking Market Structure and Capital Mobilization in the United States, 1863 – 1913. The Journal of Economic History/Volume 29, No. 4

Zinn, Howard (2003). A People’s History of the United States: The Socialist Challenge. Harper Perennial.