Fiat Money Fuels Government Tyranny, Experts Warn

Economist argues central banks and income taxes enable politicians to fund endless spending and war

Published on Feb. 6, 2026

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In a new article, economist George F. Smith argues that the Federal Reserve's fiat money system and the income tax have given the U.S. government unprecedented power to fund its agenda, including endless wars, at the expense of the public. Smith says the Fed's ability to manipulate interest rates and inflate the money supply allows politicians to buy votes and pursue their goals without regard for the consequences to the economy and individual liberty.

Why it matters

Smith's analysis suggests the current fiat money system concentrates immense power in the hands of the federal government and central bank, enabling them to expand their reach and influence in ways that undermine individual freedom and the free market. Understanding these dynamics is crucial for citizens to push back against the growth of the administrative state.

The details

Smith's article focuses on how the Federal Reserve's control over the money supply and interest rates, combined with the income tax, have given the government unprecedented fiscal and monetary power. He argues the Fed's ability to print money and manipulate rates allows politicians to fund endless spending and wars, while the income tax extracts wealth directly from citizens. Smith says this system has gradually 'overthrown' the existing basis of society in a 'hidden, insidious way' as described by economist Keynes.

  • The fiat money system began in 1971 with the Nixon Shock and the stagflation of the 1970s.
  • The income tax and the Federal Reserve were both created in 1913 under President Woodrow Wilson.

The players

George F. Smith

An economist and author who has written extensively on how the Federal Reserve and fiat money have enabled government growth and overreach.

Gary North

An economist quoted in Smith's article who has written about Woodrow Wilson's influence on later presidents' inaugural addresses and the role of fiat money.

Ben Bernanke

A former chair of the Federal Reserve who has written about the Great Depression and the need for central bank intervention in markets.

Jerome Powell

The current chair of the Federal Reserve who has stated the Fed's goal of maintaining a 2% inflation rate.

John Maynard Keynes

The influential economist whose theories on the role of government in the economy have shaped modern central banking policies.

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What they’re saying

“My fellow Americans, ask not what your country can do for you. Ask instead what your country has been doing to you and is likely to keep doing to you for as long as it can buy with fiat money the votes of a majority.”

— Gary North, Economist (lewrockwell.com)

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

— John Maynard Keynes (lewrockwell.com)

“In conducting monetary policy, we will remain highly focused on fostering as strong a labor market as possible for the benefit of all Americans. And we will steadfastly seek to achieve a 2 percent inflation rate over time.”

— Jerome Powell, Chair, Federal Reserve (lewrockwell.com)

What’s next

The article does not mention any specific future newsworthy events related to this story.

The takeaway

This analysis suggests the current fiat money system has given the federal government and central bank immense power to fund their agenda at the expense of individual liberty and the free market. Understanding these dynamics is crucial for citizens to push back against the growth of the administrative state and the erosion of economic freedom.