Guest speaker at WKU discusses Federal Reserve

Tyler Prochazka

One might not expect a lecture about a bank to draw in a big audience at WKU.

However, Steven Horwitz was able to do just that.


Horwitz visited WKU on behalf of WKU’s BB&T Center for the Study of Capitalism and the Charles Koch foundation to discuss whether the United States needs the Federal Reserve, America’s central bank system.

At the beginning of the speech, Horwitz wanted to make sure students knew he did not believe in “black helicopter conspiracy theories” regarding the Federal Reserve. He said opposition to the Federal Reserve often gets attributed to conspiracy theorists.

“You can find all kinds of problems with central banking without conspiracies,” Horwitz said.

Recently, the Federal Reserve has become a political issue, Horwitz said, partly because of former Texas congressman Ron Paul’s presidential campaigns, as well as the recent economic recession that some economists attribute to the Federal Reserve.

The fact that he is even being asked to give this lecture across the country is a surprise, Horwitz said.

“Ten years ago, if you’d said to me in 2012, 2013, the Federal Reserve would be a political issue, I would not have believed you,” he said.

Throughout the speech, Horwitz analyzed the 100-year history of the Federal Reserve and whether it was successful or not in preventing recessions and stabilizing the currency.

His conclusion was not favorable for the U.S. central bank, pointing to the Great Depression and other subsequent recessions as evidence it has been a failure.

“The Fed’s errors have been determined to be a crucial factor in creating the Great Depression,” Horwitz said.

While critics of Horwitz point to recessions and depressions prior to the Federal Reserve, Horwitz said these periods were not true “free banking” either because there were significant regulations placed on banks that caused these downturns.

“The Federal Reserve System was progressive-era legislation that was designed to solve a problem that was caused by government,” he said.

At the end of the speech, Horwitz proposed alternatives to the current Federal Reserve System, such as a consistent rate of inflation. However, Horwitz personally advocated allowing banks to issue their own private currency without government interference.

“This kind of system would avoid inflation and deflation and provide a more stable monetary environment,” Horwitz said.

He pointed to previous systems in Scotland and Canada as proof that currency can successfully be provided by the private market.

Although Horwitz said there is currently little political will to abolish the Federal Reserve, he said alternatives like Bitcoin, a private currency that operates underground, prove that people want to replace their currency.

“Bitcoin does signal a dissatisfaction with the aboveground monetary system,” Horwitz said. “There’s a sense out there that people want alternatives.”