Public Enemy Number One: The Federal Reserve

If we were in 1792, we would be calling for Ben Bernanke's head.

Ben S. Bernanke doesn't know how lucky he is. Tongue-lashings from Bernie Sanders, the populist senator from Vermont, are one thing. The hangman's noose is another. Section 19 of this country's founding monetary legislation, the Coinage Act of 1792, prescribed the death penalty for any official who fraudulently debased the people's money.

The article goes pretty deep into the history and machinations of our monetary system.

It's time to audit the Fed. Why is this even up for discussion? It is Congress's duty to coin money, but that job has been passed to the Fed, and our money supply is essentially controlled by a presidential appointment and his banker cronies.

Even Woodrow Wilson, who signed the 1913 Federal Reserve Act into law, later regretted his decision:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.

The real tragedy is that so many Cassandras have tried to warn us, but have been ignored. Now we're paying the price for the hubris of 1913.

Value of the Dollar

I posted something similar before, but this graph goes even further back in time, showing what happens to the value of a currency when it is no longer backed by a tangible asset. It isn't pretty.

The Gold Standard 2.0

For the longest time, I have disagreed with Ron Paul's call to return to the gold standard. I thought, how can this possibly work? In order for our economy to grow we must have a growing money supply, right?

Maybe. But it's impossible to accurately measure and predict economic growth, so we can't grow the money supply at exactly the same pace. So to be on the safe side we print a little extra each year, which decreases the purchasing power of each dollar already out there, and we call it inflation.

In a gold system, as the economy grows, instead of regular inflation we would have regular deflation, as the purchasing power of our gold steadily increases.

A cursory Google News search turned up some interesting analysis:

Now, a small amount of gold can go a long ways - global trade in 1913 was huge, and not matched until the mid-1990s. (I know that may seem hard to believe, but things fell a long ways down due to WWI and then the Great Depression). It was based on a 90-day instrument called a Real Bill, backed by gold held in the Bank of England. This Bills could be used to borrow against, and traded multiple times. A merchant in England contracted for cotton in the US to be shipped to a plant in China to be manufactured and shipped back to a store in London. The same, single Bill would be used at each step and often got traded or ‘discounted’ over 20 times. It all got cleared within 90 days and everyone paid off their debt - the many swaps down the chain simply paid off each other. (If you play with the math you can see it works.) As long as the balance of trade of the Bank of England was even, no net gold went in or out; it simply got shuffled in the vault from one bin to another. A small pile of gold could support a huge and growing trade system.

...

[Real Bills] were an emergent property of capitalism, arising early-on in the Italian city states, and hence were a very resilient system. Yet they died during WWI and have been largely lost to economic history. Instead we have commercial paper and other short-term instruments to finance trade, and are beholden to the whims and fancies of the banking sector.

The gold standard has been used for thousands of years. This recent fiat business is a scam perpetrated by governments trying to avoid their debts, and we're all paying for it.

Consider This

Because of inflation the dollar is worth less than 4 cents compared to 1913, the year the Federal Reserve was created.

See the value of the dollar change over 200 years.