Ignorance of the Federal Reserve System
The Federal Reserve is, without a doubt, one of the most difficult entities to understand and grasp today. Legally we do not have the right to know what goes on behind the closed doors of the Fed. Yet, we place in them the overwhelming power, control, and ability of a monopoly over money and credit. Regardless of your personal opinions on the Fed, you would have to agree that it makes no sense to give this much concentrated power to just a few people without any oversight from Congress whatsoever.
I cannot pretend to understand everything about the Federal Reserve; far from it. One may wonder if such a complex system was purposefully put into place to confuse and discourage people from fully understanding the system. When Woodrow Wilson signed the Federal Reserve Act into law in 1913, the U.S. was still on a gold standard. The currency was backed by a physical commodity, rather than a plain faith-based system like we have today.
The Founding Fathers greatly understood the dangers of paper, or fiat, money systems. They dealt with it firsthand during the Revolutionary War with the Continental Dollar. The Continental Dollar was established by the Continental Congress in 1775, and it was nothing more than worthless paper and collapsed in a matter of years after runaway inflation. This was the primary reason why these words were put in Article 1, Section 10 of the Constitution of the United States:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; [...]
The gold standard was not put in the most important document of the U.S. by accident or coincidence. The gold standard was and still is necessary for the same reasons: it holds the powers-that-be back from the incredible power of wildly expanding the money supply (monetary inflation that leads to a worthless currency and a wiped out middle class), gold and silver have been accepted as currencies worldwide for thousands of years, whereas fiat money systems have been tried countless times throughout history and failed every time.
In short, after the Fed was created, the gold standard was attacked bit by bit through 1971. Franklin Roosevelt issued executive orders confiscating many forms of privately owned gold, greatly expanded the Federal Reserve’s scope and power over money and the economy, and devalued the relation of gold to the dollar from $21.67 to $35.00 per ounce. All of these acts were in the name of stopping the Great Depression, but they only led to handing more secrecy and sheer power to central planners.
The gold standard was phased out over the next 30 years, and the power given to the Federal Reserve continued at a consistent pace. Legal tender laws were enacted, making Federal Reserve Notes the only legal currency in the U.S. In 1971, the dollar became a complete fiat monetary currency and lost all ties with gold. This is the system that we have today.
What’s interesting is seeing what’s happened with the dollar through all of these changes. Let’s start with the 100 years before the creation of the Federal Reserve (these are inflation numbers as reported by the Historical Statistics of the United States and Statistical Abstracts of the United States):
Between 1813 and 1913, the purchasing power of $1.00 actually increased to $1.76.
From 1913 to 2007, the purchasing power of $1.00 decreased to $0.05.
Do you think that these facts are merely coincidence? Let’s break these statistics down a little more.
From 1913 to 1971, when we had the Federal Reserve and at least some connection to a gold standard, the purchasing power of $1.00 decreased to $0.25.
From 1971 to 2007, with a fiat monetary system under the Federal Reserve, the purchasing power of $1.00 decreased to $0.19.
This means the purchasing power of the dollar actually decreased more than twice as quickly under a fiat monetary system, than with the minimal gold standard the U.S. had between 1913 and 1971. The Federal Reserve has managed to delay corrections by artificially lowering interest rates, but all of this comes at a price. How big? We can’t say. Tinkering with interest rates and credit cannot solve a crisis, and this will be a difficult lesson we’ll have to learn due to the incompetence of a select few who secretly control every aspect of money and credit in this nation.
