The Record of the Federal Reserve

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Let's talk
about The Federal Reserve. Consider the following facts:

A) From
1776 to 1912 (136 years), the value of the dollar, relative to the
Consumer Price Index, increased by 11%. A dollar could buy
11% more goods in 1912 than in 1776. Thus, if in 1776, you sat on
your savings pile of $1,000,000 for 136 years, it would then be
worth $1,110,000 in purchasing power (it will have appreciated in
value by 11%). A loaf of bread for Thomas Jefferson cost the same
as a loaf of bread for Lincoln 50 years later and again the same
for J.P. Morgan 50 years after that.

B) The United
States Federal Reserve was created in 1913. The stated purpose of
the Fed, by its own definition taken from its website, is to "conduct
the nation’s monetary policy by influencing money and credit conditions
in the economy in pursuit of full employment and stable prices."
Note that "stable prices" is another way of saying "stable
dollar," they are two sides of the same coin (couldn't resist
the pun).

C) Then
after The Fed's creation, from 1913 to 2008 (95 years), the value
of the dollar, relative to the Consumer Price Index, decreased
by 95%.
A dollar could buy 95% fewer goods in 2008 than in 1913.
Thus, if in 1913, you sat on your savings pile of $1,000,000 for
95 years, it would then be worth only $50,000 in purchasing power
(it will have depreciated in value by 95%). One would now need to
pay about 20X more than J.P. Morgan for one's bread. Ask my mother
how much the price of milk has increased just in the last ten years

In other words,
the value of the dollar remained extremely stable for 150 years,
then The Fed was created in order to "stabilize the value of
the dollar" and the result has been a 95% devaluation of the
dollar in less than 100 years following its creation. Below is a
graph of this history, which I've marked with the year 1913 so you
can see the change. The graph is also marked with the years of decoupling
from the gold standard, as no examination of dollar value would
be sound without such mention.

While we all
take inflation as a "given" — as something that "just
happens" in the economy — we would do well to remember that
this belief is utterly incorrect. Inflation, which is the loss of
value in your saved dollars, is caused by The Federal Reserve
through its management of the money supply. Next time you see Ben
Bernanke on the television, telling you that they "will take
the necessary steps" to help the country, consider their track
record so far, and their dismal failure at their stated objective
— preserving the value of America's money.

Outrage doesn't
even begin to describe what Americans should feel in response to
this. Yet, Americans aren't very upset, and indeed the vast majority
has no idea about any of this information. I would wager that this
is because Americans are educated in Government schools, which barely
teach basic accounting, let alone macroeconomic monetary theory.
In public school I was forced to memorize the names of every country
in Africa, yet never was there a discussion of the nature of money.
Half the nations of Africa have been renamed since, but the economic
principles which cause such political turmoil remain the same.

The Federal
Reserve System is fraudulent. Whatever its stated purpose, its effective
purpose is to create a mechanism of deficit spending by politicians,
through the insidious invisible taxation of monetary debasement
(aka inflation). With printed money, the Government can buy services
for its voters before the effects of inflation are felt. It is then
the voters whose money buys less the following year, as the new
money has raised prices, and they are none the wiser.

Obama is now
mandating that The Fed is to have more oversight, more
authority and control over the markets of the United States. If
we can learn anything from The Fed, it's that the best way to succeed
as a politician is to stretch one's failure over a long enough period
that people won't remember it.

24, 2009

Voorhees [send him mail]
is a cheerful, tax-free resident of Dubai. See his blog at

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