100 Years Ago: Why Bankers Created the Fed

The Mises Daily ^ | 12/23/2013 | Christopher Westley

[LS]

It was never the "gold standard" that kept the economy sound: it was allowing banks to print their own money, based on whatever they chose to use as backing (of course, all used gold and silver in the 1800s). But even then, with or without the BUS, there were panics and depressions. It's a part of the business cycle. One of them, the Panic of 1837, was actually CAUSED by silver inflows, which abruptly stopped in about 1832.

But you're right that whether gold/no gold, private money issue or fed there are regular business cycles. Schumpter talked about that.

[LS]

Quite the contrary, fundamentals are fundamentals. The quickest way to "fix" the Fed right now is not to abolish it, but to permit private note issue. Competition would instantly straighten it out. And as much as conservatives want to hate Wilson, the Fed was designed and drafted and outlined by small town bankers from 1910 to 1912 and developed by Taft. Wilson only signed the bill. We need to get out of the conspiracy mentality and look at real history.

Try Eugene White's book, "The Regulation and Reform of American Banking."

[Alberta's Child]

I've never been a fan of the Federal Reserve, but the information you've posted here stands well against a lot of the anti-Fed hysteria that is common among conservative/libertarian types.

The "lender of last resort" item reflects what I've read and heard elsewhere from knowledgeable people.

[khelus]

Try an inflation graph from 1913 to 2012 and compare it from 1791 to 1912.People will be horrified!

yup pretty much a straight line until 1912.

[editor-surveyor]

There is no “anti-fed hysteria.”

The fed is unconstitutional, not ‘federal’ in any way, and totally destructive of sanity and freedom, and dedicated to destroying the wealth of the people.

[editor-surveyor]

Thanks for showing us exactly what you are!

Those that attack those that speak the truth are of their Father Satan.

[Alberta's Child]

I don't see why the loss of purchasing power of the U.S. dollar between 1913 and 2013 is really a major concern unless you've been sitting with a pile of those dollars buried in a hole for the last hundred years.

As the dollar inflates in value, the value of most assets also rise to match it over time. Sure, there are distortions in prices related to advances in technology and changes in import/export markets, but that would present its own challenges even if there was no such thing as a Federal Reserve, or currency inflation.

[Marine_Uncle]

I may take you up on White's book in due time. As far as abolishing the FRB. I never suggested that. Where to deep in the doo doo at this point for such matters to be able to fix anything.

[plainshame]

Wages have never kept up with inflation.Back in the 50’s and 60’s a man could support a family with his salary/salt money but today it takes 2 working parents to support a family because of inflation.The middle class in America is vanishing because of this.

[smokingfrog]

The Creature from Jekyl Island.

free download

[plainshame]

Has anyone ever seen the US dollar value rise 400-500% like gold and silver?

[Axenolith]

And to foist the losses off on taxpayers...

It’s hard to believe that guy who said that is now on the $20 bill.

I believe he's on there out of spite...

[LS]

In 1920, you bought a men's suit of clothes for about $20, or one ounce of gold. Today, a nice men's suit is about $1000. I'm not talking J.C. Penney. So, it's not too devalued from 1920. In fact, over the last five years or so, gas prices (for example) have stayed pretty stable at about $3.00, after jumping up from $1.50 under Bush, where they had remained since early Clinton days. I recall getting gas in the early 90s at about $1.00. Point is, I don't see this "devaluation" that you're talking about.

Computer chips are a tiny fraction of what they were in 1980; energy is about triple (over 30 years, or 1% a year, which is pretty stable). My paycheck buys about the same amount of food that it bought 10 years ago, excluding raises (which have all gone into savings).

[LS]

Perhaps, but the simple fact is the USA would not even exist without his financial contributions. A true patriot.

[LS]

Not true at all. My fix would work in less than a year. Competitive money-—something, BTW, that Milton Friedman rejected-—would instantly force the banking system back onto sounder footing.

[LS]

Well, I once debated free banking with Milton Friedman going down a barge on the Danube! I was in favor, he was opposed. I sat in a libertarian/conservative panel for three days while they tried to "fix" the banking system, and they all agreed gold wouldn't work.

My "fix," however, is much simpler: allow people to issue their own money. They back it with whatever they want. You can bet that the "good" money would immediately surface, just as it did in the 1840s when an Atlanta banker named George Smith backed ALL of his money with gold (not just fractional reserves) and it became the 100% total circulating medium of . . . Chicago, where they banned banks.

It's funny to look at the leftist critiques of the Fed, as they think that it was a "corporate" stopgap to keep from imposing higher income taxes.

[SVTCobra03]

I agree. The Rothchilds and the Illuminati were behind the Federal Reserve and the frog is almost boiled.

[Marine_Uncle]

I’ll not argue on the points you made.

[plainshame]

You don’t have to see it because the government is hoping you don’t.Food and gas must never have gone up in your area in the past 20 years.Are you in comedy?

[dr_lew]

That is what they call “stability”

My Coke machine at work has been at $1 per can for a few years, at least. When did it go to a quarter? I feel like it hit that in the sixties, maybe the seventies, when I was humming along on a few K per year. I got a real job and I thought I'd be rich. Funny thing about that.

You know, back in the eighties I recall someone with a chinese background, shall we say, marveling at a conversation she heard from a woman saying her daughter was selling Girl Scout cookies, just like she had done. This was unimaginable stability to her. In China this amount of time represented the lapse of ages.