And we’ll start September off with three excerpts that prove that the Gold Standard folks have a very good point (that isn’t on the tops of their heads).
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.
The United States Federal Reserve System was created in 1913. The stated purpose of the Fed, by the definition taken from its own 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.”
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.
Now, Charles Johnson thinks these people are out to ruin the nation by having Ron Paul and his “Audit the Fed” bill get passed. I’m not quite sure, but you might want to read this too.
My problem with the “Audit The Fed” thing is, who would be doing it? Who would be appointing who would do it? I don’t want Pelosi, Reid, Obama, Geithner, Frank, Dodd, or any of that crew anywhere near there.
We might be better off just abolishing it, and I’m not sure how that would work. Just because I’ve been reading Hayek and Friedman, doesn’t make me an economist…
If we were to abolish the fed and return to monetary stability, it would be something like going from a 5 cup a day coffee habit to zero. Do it in one day and there would be pain. Do it stretched out over too many days to reduce the pain and it would never happen.