End the Fed and replace it with what?

Last week, Rep. Thomas Massie (R-KY) introduced the Federal Reserve Board Abolition Act (HR 8421). The bill would do exactly as its title suggests: abolish the Fed.

“Americans would be better off if the Federal Reserve did not exist,” Massie said. “The Fed devalues our currency by monetizing the debt, causing inflation.”

Massie’s bill directs the Fed to transfer its assets to the U.S. Treasury Department and thereafter cease operations.

Left unstated in the legislation is how (or whether) the Treasury Department would assume the role of managing the nation’s currency.

That’s a big issue.

Some far-left members of Congress also want to transfer control over monetary policy away from the Federal Reserve. They want to control it directly themselves.

Proponents of so-called Modern Monetary Theory want the government to be able to create limitless quantities of U.S. dollars out of thin air in order to pay for any and all spending Congress authorizes – thus bypassing the need to issue bonds and sell them to the Fed.

Handing Congress the power to inflate the currency supply at will is an obvious recipe for disaster, given the legislative body’s propensity to spend recklessly and rack up intractable budget deficits in the process.

Sound money advocates believe that if the government is going to be in charge of issuing a legal tender national currency, then that currency should be backed by – or better yet, actually comprised of – something with real value.

Our nation’s Founders provided a blueprint for sound money by defining dollars in terms of a specific quantity of gold and silver.

Ending the Fed is a necessary step toward restoring sound money. But any monetary system based on unbacked, irredeemable fiat currency – whether controlled by bankers or by politicians – is inherently unsound.