One of the most vocal and important critics of the Federal Reserve is Congressma
ID: 1213723 • Letter: O
Question
One of the most vocal and important critics of the Federal Reserve is Congressman Dr. Ron Paul, who wrote a book in 2009 titled End The Fed. The second chapter of the book is available on the website of the Ludwig von Mises Institute at http://mises.org/daily/3687
1. According to Dr. Paul, do big banks like or dislike the Federal Reserve System and its control over the banking industry? Why do you feel this way?
2. What has happened to the value of $1 since the creation of the Federal Reserve System in 1913? What does Dr. Paul think of the claim that part of the Fed’s job is to keep inflation in check ?
3. The Comptroller of the Currency in 1914 said that with Federal reserve System, “financial and commercial crises, or ‘panics,’ as this country experienced in 1873, in 1873, and again in 1907, with the attendant misfortunes and prostrations,seem to be mathematically impossible.”
4. How does Dr. Paul respond to this mathematically Impossibility? Where does Dr. Paul believe that the business cycle starts: in the bust, or in the boom?
Explanation / Answer
Q2. The value of $1 has declined many folds since the creation of the Federal Reserve System in 1913. For instance, the amount of goods and services that can be bought with $1 in 1913 now needs $21. In other words, value of $1 today is just $0.05 of the value of $1 in 1913. Thus, $0.95 of every dollar has been sacrificed to inflation from 1913 to till date.
Dr. Paul does not subscribe to the claim that part of the Fed’s job is to keep inflation in check. In fact, he states that instead of keeping inflation in check, Fed, actually, generates inflation. It only attempts to stop the adverse effect of inflation. He argues that by indulging in artificial maneuvering of money supply and credit, Fed generally generates more of inflation and not less of it.
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