“An inhabitant of Berlin, who in 1914 would have been jubilant upon receiving an unexpected legacy of 1,000 marks, did not think an amount of 1,000,000,000 marks worth his attention in the fall of 1923.“— Ludwig von Mises, Interventionism, An Economic Analysis
My choice for the worst market intervention of all time is The Federal Reserve Act of 1913, including all amendments since then and in particular the changes made in 1917 to help pay for US entry into World War I, one of the most catastrophic and groundless decisions in world history. The Fed is even worse than the income tax, which made its appearance in the same year with the corrupt ratification of the Sixteenth Amendment. Unlike the income tax, the Fed’s thievery is invisible to a majority of dollar holders—their money dies gradually like the light from a setting sun. Add to this the Fed’s deception as it poses as a steadfast fighter of inflation while, over the decades, having switched the definition of “inflation” to mean rising prices rather than deliberate increases in the money supply, thereby deflecting guilt to the bogeymen of the moment.
For most people today, the damage can be seen easily by visiting the Bureau of Labor Statistics Inflation Calculator and observing how the dollar has declined to three percent of its value since 1914. Three pennies, in other words, had the same buying power then as a dollar does today.
Ever wonder why the BLS inflation calculator doesn’t include years before 1913? Perhaps because the dollar increased in purchasing power following the War for Southern Independence. From 1870 to 1900, the dollar had a cumulative price change of -35.88 percent, meaning a dollar would buy considerably more in 1900. (By comparison to a mostly Fed-dominated period—1900 to 2025—the cumulative price change has been 3,657.20 percent, and the CPI has grown from 8.4 to 315.6.) And according to NBER—from 1870 to 1912—which included a return to a government-declared gold standard in 1879, industrial production increased 681 percent.
Late 19th-century was also a period of mergers, as competition was cutting into profits. Yet, as revisionist historian Gabriel Kolko explains, without government assistance,
The new mergers, with their size, efficiency, and capitalization, were unable to stem the tide of competitive growth. Quite the contrary! They were more likely than not unable to compete successfully or hold on to their share of the market, and this fact became one of utmost political importance. (emphasis added)
Bankers Tap the Government for a Law
The Fed would not work without the government granting it exclusive control of the issue of banknotes. Not coincidentally, the Fed has become a reliable buyer of its debt, which amounts to $4.7 trillion as of the third quarter 2024.
What iron-clad logic was behind the creation of the Fed in 1913 that has decimated the value of the dollar since then and brought us dangerously close to nuclear Armageddon? The excuse given is the economy needed a more flexible currency and a lender of last resort. As it turned out, it meant the Fed would roll money off a printing press at a rate it alone deemed appropriate, and the public—you and me—would unwittingly be lender of last resort in our tax-paying capacity. It’s one way the rich got richer and the rest of us poorer.
What the world has witnessed is Mises’s observation about government intervention at work—intervene once and subsequent interventions follow in an attempt to counter the damage inflicted by the original. Then it tends to spread like a cancer. The world has witnessed it—and dutifully ignored it. A racket such as the Fed always has winners, and the winners want to keep the racket going. They tell us a central bank is necessary for a modern economy and if the Fed occasionally finds the economy in a crisis it’s only a reflection of how difficult its job is and should not be considered a criminal undertaking in partnership with a criminal government.
Not by choice the money we use today are digital and paper tokens of diminishing value. Fed chairmen don’t use the term “sound money” often when referring to their product. Government-controlled economies don’t use sound money. Sound money obstructs “the government’s propensity to meddle with the currency system,” and this eliminates precious metals and cryptocurrencies. Sound money is anti-state.
Instead of sound money, the preferred term since Keynes is price stability. Keep inflation running at about 2 percent and never let it go lower. A 2 percent inflation rate means the dollar would lose a third of its value in 20 years, solely because of a deliberate inflationary policy.
When one considers the full import of how governments have burdened their populations with government-controlled money that they or their central banks can bring into existence in any amount at the tap of a key, it’s no mystery why the world has failed to extract itself from the barbarism of the World War era of the last century. The US government has been avid about fighting wars that certain connected industries find lucrative while keeping the public distracted. There are always “monsters to destroy” and—if the government can’t find any—it has myriad ways of creating them, such as rolling NATO east instead of disbanding it or becoming aggressive to Israel’s benefit.
Conclusion
There’s a story in the news about a man named John Harold Rogers—a former Senior Adviser for the Federal Reserve Board of Governors with a PhD in economics—who everyone thought had been teaching classes in China to graduate students but is now believed to have also been a spy for the PRC. Whether or not the allegations are true, a trial will decide. If only we could put the Fed itself on trial, and send it off into the dustbin of history, we would be free of both spy stories and bad money.
