What Has Government Done to Our Money?

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The stock market and housing prices are at all-time highs and economic growth and unemployment signal a strong economy. However, most polls show large majorities of Americans believe the economic situation is dire. There are increasing numbers of people who need housing, education, food, energy, and other financial aid. Most people cite rising prices as the reason.

This leads to the fundamental question: what is causing these price increases? More broadly, why does the dollar lose value every year?

The answer to these questions leads us to the Federal Reserve, the central bank of the USA. Congress created the Federal Reserve in 1913. Since its creation, the dollar has lost 97 percent of its purchasing power.

The Federal Reserve was sold to the American people to bring stability to the banking system and prevent the “boom bust” business cycle. Instead, we’ve had nineteen recessions, including two depressions, and numerous taxpayer-funded bailouts that are increasing in size and frequency.

The Federal Reserve is neither a government agency nor a private corporation. It is a banking cartel that has a government-granted monopoly on the creation of money. In return for this privilege, the Federal Reserve funds government spending not paid for by taxes and fees. Since it allows politicians to spend money without directly taxing its citizens, both Democrats and Republicans overwhelmingly support it.

In the last 30 years, there have been massive changes in the economy. Technological advances and outsourcing to low-cost countries like China have significantly driven down costs. One would expect general price decreases as a result but instead, prices continue to rise. These price increases are caused by excessive money creation, otherwise known as inflation, used to fund government spending.

A significant amount of this government spending has been on wars. A recent study calculated that the cost of just the Afghanistan, Syria, and Iraq wars alone was $8,278 per taxpayer. None of us got a bill for these wars; they were funded through inflation. However, these wars are not free. We all are paying indirectly through higher prices (i.e., the inflation tax).

More government spending has been on so-called entitlement programs. These programs are popular with the citizens and, therefore, politicians don’t want to address the fact that as currently structured they are insolvent. Perhaps if the full cost of these programs were collected through taxes, the programs wouldn’t be so popular. Either way, an honest government would ensure future promises are kept by either raising taxes and/or reducing benefits.

Inflation has increased economic inequality. In a free society, economic inequality caused by differences in talent, ambition, and effort is necessary and desirable. However, excessive money creation has inflated asset values of stocks, bonds, and real estate that are owned disproportionately by wealthier people. Also, politically connected people get the benefit of the newly printed money before its value depreciates as it cycles through the economy. The resulting inequality has contributed to disunity and division.

So, how do we fix this? There are several steps that would need to occur, but I’ll list some of the more critical ones. First, abolish the Federal Reserve. Most people don’t realize this, but this country previously had three central banks and they were all abolished. It can be done. Second, the Federal Government must once again define a dollar as a certain weight of gold or silver. That will prevent inflation and stabilize prices. Third, repeal legal tender laws that force people to accept worthless paper as payment. Finally, allow free and honest banking where deposits are either stored, loaned, or invested based on customer desires and risk-tolerance.

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