One of the most vocal and important critics of the Federal Reserve is Congressma
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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
Ans 1) According to Dr. Pau;, big banks like the federal reserve system and its control over the banking system.The banks couldn't expand money and credit as much as they wanted.Th big banks were unhappy preceding the formation of federal since there was no lender oflast resort. They couldn't inflate without limit and count on a centralized institution to bail them out.
Ans 2)There as been a decline in the value of the dollar that has taken place since the Fed was established in 1913. The goods and services you could buy for $1.00 in 1913 will now cost nearly $21.00. Another way to look at this is from the perspective of the purchasing power of the dollar itself. It has fallen to less than $0.05 of its 1913 value.
the Fed itself claims that part of its job is to keep inflation in check. This is something like the tobacco industry claiming that it is trying to stop smoking or the automobile industry claiming that it is trying to control road congestion. The Fed is in the business of generating inflation. It might attempt to stop the effects of inflation, namely rising prices. But under the old definition of inflation — an artificial increase in the supply of money and credit — the entire reason for Fed's existence is to generate more, not less of it.
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