The Impact of The Federal Reserve, Central Banking, and the Absence of Gold Money, and its effects on the economy.
Since the Federal Reserve’s inception, it has had the honor of being the longest operating central bank in the united states history. The federal reserve, abolished the idea of the gold standard. It took the currency away from the minting abilities of congress, and deemed that all money issued by congress to no longer be backed by gold, but by whatever arbitrary number the fed chairman and board of directors decides based off interests rates. Which is the true value of money. How currency backed purely by gold had worked was, each dollar was representative of a single ounce of gold that the government physically existed. With the advent of the fed however, congress had no power to print money at its own discretion. It turned over all power to the federal reserve. The federal reserve was implicated like all central banks are to keep “stability over currency and the economy.” Which is nothing more than short term low interest rates that turn into bubbles. The Fed’s existence has ruined real money backed by gold. Without Gold backed dollars the value of dollar the value and purchasing power is determined by the interest rates that the federal reserve holds low, along with their process of printing money out of thin air (as its not backed by gold since Nixon, the fed can do this is an unlimited fashion.) When the fed prints money it increases the money supply and according to simple laws of supply and demand, the more physical dollars in existence the lower their value becomes, hence the massive inflation we’ve seen. Done believe it well just go play with this Inflation Calculator it shows that inflation is 2000% since 1913. So one dollar in 1913 would be ~$24.31. Which is a ludicrous inflation rate, which would not occur so severely in a gold backed dollar system. This isn’t to say inflation would occur, obviously it would as gold coins would either be added or removed from the economy, but inflation rates of 2000% would not occur. We can also see the problem with a fully fiat currency in the price of gold since 1971. Since 1971 to now the price of gold has gone up steadily year by year (with a few exceptions in the 80s and 90s) from $44.60 in 1971 to $1,060 in 2015. While steeply growing after the financial crash of 2008. Seeing this is a rising indicator people aren’t trustworthy of the worthless fiat money the government has been using. They want precious metals as a security net. Seeing how they have real nearly unchanging value. One ounce of gold is one ounce of gold that becomes very hard to inflate because gold cannot be printed off in unlimited quantities, unlike the paper dollar which can be printed out at will and cause the money supply to increase. While fiat currency can be argued to be flexible to save the economy from depressions, a major issue with a non gold backed currency is debt. When the federal reserve is not required to only print off only as many notes as to how much gold we have, they can print endlessly causing massive debt as the united states government has to borrow the money from the federal reserve. As the debt rises closer and closer to 20 trillion it is reaching unsustainable levels of worthless paper. On a pure gold standard we would not have massive debt because the federal government could only borrow as much in accordance to how much gold is possessed by the government. Another failing issue with how gold has been severely harmed is with many mainstream economists to believe that gold caused the great depression which simply isn’t the case as many world wide prolonged depressions had happened before the great depression and even after Roosevelt left the standard in 1933 the depression continued until after world war two. The depression was actually caused in an unstable inflation of money supply leading to an uneasy boom in the price of capital goods which once exhausted the bubble burst. The gold standard abandonment has done nothing more than give the united states an unstable monetary policy and caused massive inflation while letting The Fed take control over our lives and capital.
By Cade Buckley