Actually, it isn't. The Fed was created as an end run around the Constitution. The Constitution does not grant this power because of the experience with the Continental Congress and their profligacy at printing money.
> Get rid of fractional reserve banking while you're at it.
Nothing wrong with that. Its excesses are held in check under a free banking system.
>"The Constitution contains only two sections dealing with monetary issues. Section 8 permits Congress to coin money and to regulate its value.
www.let.rug.nl/usa/essays/general/a-brief-history-of-central-banking/money-and-the-constitution.php
The fact the Fed's balance sheet swelled to 4.5trillion with free money is just outrageous. Wall St, nor the Fed, can regulate themselves and they their "dual mandate" is financial alchemy at best.
And replace it with what? The barter system?
Something Milton Friedman and Paul Krugman agree on, at least at times, is that commercial banks should be like utility companies.
Oh ... wait ...
https://www.foreignaffairs.com/articles/1932-01-01/crisis-go...
The problem, at its root, is that we have large parts of the world with negative trade balances. What that boils down to is that there are large parts of the world that don't have any economic use but get included anyway.
Those parts represent interruptions to an economy that only works long-term if it's a circle.
Now just so we're clear: the problem is overcapacity, and a demand-limited economy. The solution is obviously not to cut parts out and lower demand further (why not ? Because anyone doing that will get outcompeted in a credit-based economy and therefore doing this is not a Nash equilibrium).
Loans and Home mortgages would be impossibly difficult to get. You do realize that when we get a loan from the bank, the loan amount minus the down-payment exists only electronically? The balance is supposed to be wiped out if we repay the loan but that never happens.
I am not saying fractional reserve banking is perfect but what are the alternatives?
However, with a k-percent rule keeping inflation at 0.5-1% it would not be that much harder to get financing. I do agree we need monetary growth to avoid commodity money. In other words, we don't want people holding money because it grows in value--we want people to have some incentive to invest it.
If you want to give people free money to buy houses, just give them free money. Wall St & the Fed are a criminal middleman profiting off everyone else's expense.
The real question is how do you fairly grow the money supply if we cut out the Fed? Maybe finance national healthcare this way. Hospitals could issue currency and buy securities on the open market. We could even restrict it to treasuries to subsidize the national debt like we do now.
After Lincoln won they just weasled their way back in.
The Fed can just electronically debit an account and create money out of thin air. However, the power to control the US money supply is a constitutional right of Congress. We should take that back. It should be done via a k-percent algorithm. Get rid of fractional reserve banking while you're at it.