For more than six months President Trump has been very critical of Federal Reserve Chairman Powell. A rapidly sinking stock marked caused, in part, by eight interest rate increases since the president took office, is at the root of the conflict. President Trump has reportedly expressed a desire to fire the chairman. Abolishing the entire Federal Reserve would be far more beneficial to the American people.
People often wonder why both parents now have to work in order to make ends meet, and still that often is not enough. They contrast it with the way things were for previous generations. Inflation caused by the Federal Reserve often escapes the blame, even though it is directly responsible for most of their financial ills. This inflation calculation website documents the drastic drop in value of the dollar since the Federal Reserve was created in 1913
According to the Bureau of Labor Statistics consumer price index, prices in 2017 are 2,375.96% higher than prices in 1913. The dollar experienced an average inflation rate of 3.13% per year during this period.
In other words, $1 in 1913 is equivalent in purchasing power to $24.76 in 2017, a difference of $23.76 over 104 years.
Progressives have often blamed President Calvin Coolidge for causing the Great Depression. This Foundation for Economic Education article places the blame exactly where it belongs, with the Federal Reserve as the chief instigator, rather than President Coolidge.
Should Coolidge get any of the blame for the Great Depression? The Federal Reserve’s expansion of money and credit in the 1920s certainly set the country up for at least a mild fall, but that wasn’t Coolidge’s fault. He saw the Fed as the “independent” entity it was supposed to be and didn’t meddle with it. At least once he expressed concern that the Fed might be fostering a bubble but he otherwise didn’t make a stink about it. “Not my bailiwick,” he believed.
The next four quotes from the same article documents the different blunders that led to the Great Depression. As you can see, the Federal Reserve played a major role.
…far worse than the Fed’s inflation was its deflation, which didn’t begin in earnest until the final weeks of the Coolidge administration. After years of depressing interest rates artificially with easy money, the Fed by early 1929 was jacking them up and choking off money and credit. It continued to do so by either deliberate intent or actual effect for the next three years.
Every good economist concedes that erratic monetary policy at the Fed was at least a minor cause of the 1920s boom and surely a major cause of the 1930s bust. You can’t blame that on Coolidge. You should point the figure at the monetary “central planners” that progressives empowered and told the rest of us we could put our trust in.
Even six months after the October 1929 stock market crash, the economy wasn’t yet in a deep funk. Markets were, in fact, making a comeback in the spring of 1930 and unemployment had not yet hit double digits. Not until June 1930, when Congress and President Hoover raised tariffs and triggered an international trade war, did recession cascade into depression. Two years later, they flattened just about everybody who was still standing by doubling the income tax.
In 1932, Franklin Roosevelt beat Hoover on a platform promising less government, not more. He then delivered just the opposite when he got to the White House. His absurd interventions kept the economy in depression for another seven years.
Thomas Sowell is often critical of the Federal Reserve. Here are quotes from this Jewish World Review article
During the first hundred years of the United States, there was no Federal Reserve. During the first one hundred and fifty years, the federal government did not engage in massive intervention when the economy turned down.
No economic downturn in all those years ever lasted as long as the Great Depression of the 1930s, when both the Federal Reserve and the administrations of Hoover and of FDR intervened.
The myth that has come down to us says that the government had to intervene when there was mass unemployment in the 1930s. But the hard data show that there was no mass unemployment until after the federal government intervened. Yet, once having intervened, it was politically impossible to stop and let the economy recover on its own. That was the fundamental problem then– and now.
Ron Paul is perhaps the most vocal critic of that unelected body, which has been unconstitutionally granted far too much power and authority over the entire United Sates economy. Here is what he had to say during the introduction of the Abolish the Federal Reserve Act
From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts.
The founders of this nation were also very critical of the type of central banking that the Federal Reserve represents. Here is an excerpt from a letter from Thomas Jefferson to John Taylor 1816
The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens. Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it…I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
The first steps in restoring our economy are abolishing the unconstitutional Federal Reserve and returning to the gold standard.