President Reagan famously said that the closest thing to eternal life on this earth is a government agency. Surely that aphorism applies to the Federal RESERVE. And most especially when you put a Trumpian ALL CAPS focus on the “reserve” part of its title.
That is to say, the purpose of the 1913 act had nothing to do with the Fed’s present-day “goals” with respect to inflation, unemployment, economic growth, housing starts, business capex, or any other aspect of the ebb and flow of commerce on Main Street. Instead, the Federal Reserve Act’s far more modest remit was to fix the badly flawed “reserve” arrangements of the National Banking Act that good old Abe Lincoln and his Treasury Secretary Salmon P. Chase had put into place to finance the civil war....
....But, alas, the Fed did not put itself out of business in March 2020. To the contrary, in less than 26 months, it generated $4.8 trillion of new central bank credit–or more than it had issued during its first 106 years of operation. That’s because the original narrow liquidity purpose of the Federal Reserve banks had long been surpassed by sweeping mission creep that had finally resulted in today’s form of monetary central planning.
And this “mission creep” started almost from the day the Fed went into operation in November 1914. To wit, 30 months after the Fed opened its doors, Woodrow Wilson took America into a pointless war in Europe and needed massive amounts of cash to fund a two-million-man army that was being mobilized, trained, and deployed to France from scratch.
So he committed the greatest possible monetary sin. Namely, he untethered the Fed’s printing press from the ebb and flow of Main Street commerce, allowing US Treasury debt to become eligible collateral for Discount Window loans.
Needless to say, it was off to the races from there. Self-evidently, politicians have an infinite capacity to spend and borrow on the state’s credit when the discipline of rising yields and “crowding out” in the bond pits is short-circuited by central bank absorption of the government’s debt as “collateral” for printing press credits.
In 1933, FDR decreed that citizens could not own or trade in gold to protect themselves from inflationary central bankers. And then in August 1971, Tricky Dick supplied the coup de grâce by closing the gold window to foreign central banks as well.
Now America’s money was all fiat, all the time. And, not surprisingly, since August 1971, the consumer’s dollar has also lost 87% of its purchasing power.
