On Monday, the Wall Street Journal reports (“Wall Street Protesters Plan to Stay Awhile,” September 19), “[m]uch of Wall Street remained barricaded to foot and road traffic Monday morning as hundreds of protesters continued a demonstration against U.S. financial institutions.” The protests, which the story admits have been “largely peaceful,” have been compared to those of the Arab Spring and were coordinated — if, in fact, one could use that word — largely though the use of social media.
Also like the demonstrations of the Arab Spring, the “Occupy Wall Street” protesters are not unified by any one, consistent ideological bent. Instead, their consensus runs only as far as their opposition to the corporate banking status quo.
At the present moment, when Wall Street is customarily held out as a symbol of America’s free enterprise system, or even used as a synonym for “the markets,” it may seem downright odd to situate it in opposition to free markets.
Debates endure among the libertarian-minded as to the possible or likely effects of freeing banking and the currency trade from the corrupt clutches of the state. The American individualists of the nineteenth century, holding that the state limits access of the working class to capital, trusted that the disappearance of the state would coincide with an end — or near end — to interest.
The Austrian School model of stateless banking, on the other hand, tends to predict an increase in rates of interest to accompany the termination of central bank inflation, which, it contends, floods the market with easy money. Whether or not these two accounts can be reconciled — and there are reasons to believe that they can be — there are nevertheless meaningful areas of agreement, especially as to the plutocratic nature of the state’s role.
Central banks such as the Federal Reserve in the U.S. are granted the license to increase the amount of money in circulation at their discretion, both printing dollars on their own and allowing the Wall Street banking cartel to lend and take interest on money that they don’t actually have in their possession — money that doesn’t exist as anything more substantial than air.
In a genuine free market without state intervention, this kind of system, called fractional reserve banking, might remain in existence, but, tempered by real market responses, it would look quite different. For without bank licenses and legal tender laws to protect monopoly status in banking and currency, consumers of financial services would quickly learn to vacate or avoid irresponsible institutions.
As a disincentive to unchecked inflation, the “bank run,” whereby worrying bank depositors withdraw their cash, is precluded in the current environment. Since banks are insulated from competition by market barriers in the form of licenses and capitalization requirements — and are able to appeal to the state for fiat money bailouts — the helpless consumer is at their mercy.
As J.K. Ingalls wrote at the end of the nineteenth century, it’s absurd to “suppose that protective tariffs, legal tender, specie basis and special banking laws afford more than the most shallow pretense of benefiting the worker, while designed to promote class rule and private emolument of the favored few.”
Were working people allowed to mobilize and administer credit on their own terms, outside the state’s arbitrary restrictions, the dominion and the never-ending crises of the commercial banking class would cease to exist. If not captive to the influence of investment bankers, the business framework would no longer countenance the stifled, hierarchical institutions of the current corporate system.
The protesters on Wall Street today are onto something, recognizing, even if only implicitly, the moral hazard created by the state’s intervention into banking, credit and money. Should we all join in their nonviolent protest, we can witness a true free market transformation able to save us from the “too big to fail.”