The case against the fed

[...]... then is responsible for the blight of inflation? Who except the very institution that is solely empowered to create money, that is, the Fed (and the Bank of England, and the Bank of Italy, and other central banks) itself? In short: even before examining the problem in detail, we should already get a glimmer of the truth: that the drumfire of propaganda that the Fed is manning the ramparts against the. .. supply of money, thereby driving up the prices of goods and services and driving down the purchasing power of the money-unit; and (2) changing the distribution of income and wealth, by putting disproportionately more money into the hands of the counterfeiters The first part of the process, increasing the total money supply in the country, was the focus of the "quantity theory" of the British classical... increase in the money supply also changes the distribution of income and wealth The ripple effect also alters the structure of relative prices, and therefore of the kinds and quantities of goods that will be produced, since the counterfeiters and other early receivers will have different preferences and spending patterns from The Ludwig von Mises Institute • 25 The Case Against the Fed the late receivers... and cause of the problem What The Ludwig von Mises Institute • 11 The Case Against the Fed we need is not a totally independent, all-powerful Fed; what we need is no Fed at all The Genesis of Money It is impossible to understand money and how it functions, and therefore how the Fed functions, without looking at the logic of how money, banking, and Central Banking developed The reason is that money is... Institute • 9 The Case Against the Fed increase in the production or supply of cotton will cause that crop to be cheaper on the market; so will the creation of more money make its unit of money, each franc or dollar, cheaper and worth less in purchasing power of goods on the market But let us consider this agreed-upon fact in the light of the above myth about the Federal Reserve We supposedly have the public... neighborhood in for a shot in the arm!" And indeed it was The first people who get the new money are the counterfeiters, which they then use to buy various goods and services The second receivers of the new money are the retailers who sell those goods to the counterfeiters And on and on the new money ripples out through the system, going from one pocket or till to another As it does so, there is an immediate... first the counterfeiters, then the retailers, etc., have new money and monetary income which they use to bid up goods and services, increasing their demand and raising the prices of the goods that they purchase But as prices of goods begin to rise in response to the higher quantity of money, those who haven't yet received the new money find the prices of the goods they buy have gone up, while their.. .The Case Against the Fed of "democracy," whether domestic or global, rush to defend the alleged ideal of the total independence of the Federal Reserve Representative Barney Frank (D., Mass.), a co-sponsor of the Gonzalez bill, points out that "if you take the principles that people are talking about nowadays," such as "reforming government and opening up government the Fed violates it... important for the Fed, and for other Central Banks, to invest themselves with an aura of solemnity and mystery For, as we shall see more fully, if the public knew what was going on, if it was able to rip open the curtain covering the inscrutable Wizard of Oz, it would soon discover that the Fed, far from being the indispensable solution to the problem of inflation, is itself the heart and cause of the problem... seen, is indispensable to the functioning of any economy beyond the most primitive level, and while the existence of money 18 • The Ludwig von Mises Institute Murray N Rothbard confers enormous social benefits, this by no means implies, as in the case of all other goods, that, other things being equal, the more the better For when the supplies of other goods increase, we either have more consumer goods . on the market, then every single exchange includes the money-commodity as one of its two commodities. Jones will sell fish for the money commod- ity, and will then "sell" the money. inflexible commitment to wage a seemingly permanent "fight against inflation." This is the Johnny-one-note of the Fed& apos;s defense of its unbridled power. The Gonzalez reforms, Fed officials warn,. Federal Reserve, on the other hand, guided by monetary experts independent of the public's lust for inflation, stands ready at all times to promote the long-run public interest by manning the battlements