Ex-Fed Chairman: Central Banking Is Counterfeiting, Gold Is the Answer

A former Federal Reserve chairman has issued a blistering attack on the institution he once led, calling central banking a form of counterfeiting that enriches elites at the expense of ordinary savers. In a speech excerpted from the book The Flight of the Barbarous Relic, the renegade policymaker argued that the gold standard remains the only reliable check on monetary inflation.

"There should be a sign on the front of the Eccles Building in Washington saying, 'We work for the elites–the commercial bankers and government–at the expense of everyone else. Try and stop us,'" he said.

The speech traces the history of money from gold-backed notes to today's fiat system. The chairman described the creation of money electronically or with a printing press as counterfeiting. "Bankers create money and loan it out at interest, which can be very profitable. The trouble is, creating money electronically or with a printing press, which is what central banks do, is counterfeiting."

He argued that the solution is a free market in banking with property rights enforcement as the discipline. "Gold won the competition as the most popular money long ago. When a rare commodity such as gold is used for money, the supply remains fairly constant."

The former chairman said the Federal Reserve Act of 1913 was not a reform but a cartel. US bankers, inspired by European models, devised a central bank to control the rate of monetary inflation uniformly. "Since no cartel will work without government guns, it was natural, perhaps, to attach the name 'federal' to it, as well." The Fed was called a "reserve system" to disguise its nature, with regional branches to lull agrarian suspicions, as John Kenneth Galbraith later observed.

He criticized the belief that the Fed would end panics and depressions. "Those were the beliefs; the facts reveal a far different story." The speech argued that by issuing unbacked notes and credit, banks increased the money supply in a process identical to counterfeiting. "An increase in the supply of money confers no broad social benefits–it does benefit early users of the new money at the expense of others," he said.

The former chairman warned that the dollar is doomed under a fiat standard. "When new money is created as a matter of policy, as it has been for generations with the encouragement of leading economists, the dollar is doomed, and so are dollar users."

He acknowledged that banking is crucial to civilization, enabling the division of labor that reduced child mortality and raised living standards. He insisted that historically, the gold redemption promise served as a vital check. For Americans, the gold standard ended by presidential decree during the Great Depression, and in 1971 President Nixon removed the last trace of monetary gold from international trade.

"The story of gold's disappearance is part of a larger narrative about the growth of government," he said. "Besides being a check on bank counterfeiting, gold is also a serious restriction on government expansion. For the advocates of big government, therefore, gold becomes a barbarous relic that stands in their way."

The speech concluded with a call for a return to sound money, arguing that gold's role as a monetary anchor is not obsolete suppressed by the same institutions that benefit from inflation. The former chairman's critique echoes a long tradition of gold-standard advocacy, his insider perspective gives it unusual weight. For those tracking the gold debate, the speech provides a detailed case for why the metal remains a relevant hedge against fiat currency depreciation. Read more about gold's profile as a monetary asset.