The Federal Reserve In No Way Enables Federal Government Expansion

BusinessPolicyThe Federal Reserve In No Way Enables Federal Government ExpansionByJohn Tamny,Contributor.Follow AuthorMay 31, 2026, 10:00am EDTFacade of the Marriner S Eccles building of the United States Federal Reserve, the agency of the Federal Government responsible for setting the monetary policy of the United States, as well as determining interest rates, Washington, DC, July 24, 2017. (Photo via Smith Collection/Gado/Getty Images).Getty ImagesGovernments have no resources. They can only consume insofar as they have taxable access to private sector production. If you were to say the above at the libertarian Cato Institute, the libertarian leaning Mises Institute, the conservative American Enterprise and Hoover Institutions, and even at the increasingly populist Heritage Foundation, the audience and scholars at all five institutes of thought would nod along in agreement.Which is why it’s puzzling that those same centers of right-leaning thought have created a policy “out” for themselves. The Federal Reserve has become some kind of other to which absolute truths don’t apply. According to right-leaning economists, the Fed and other central banks enable government growth. They do no such thing. Governments have no resources, period. To pretend that a creation of government could enable that same government’s growth is not just shockingly obtuse on its face. It also violates Say’s Law, among other things, for presuming that consumptive power can be created out of thin air. All consumption is preceded by production, and since governments produce nothing (another certain applause line at Cato, Mises, AEI, Hoover, and Heritage), the innocent are reduced to asking if the Fed gets its consumptive power from Pluto?In response to the above, Miseans will quote Austrian School legend Guido Hulsmann, and his famous line about how “…fiat money allows the government to take out loans to an unlimited extent because fiat money by definition can be produced without limitation.&qu...