The Federal Reserve

End the Fed and Return to the Gold Standard!?

Part of Ron Paul’s narrative is that the federal reserve and the switch from a gold standard to a fiat currency is the cause for many of our problems today.  The claim here is that not being backed by gold, our currency is too unstable and that the Federal reserve has only served to create bubbles which eventually burst.  However, this is very little in the way of actual evidence for this.  The longer the Fed has been in existence, the more stable the economy has been.  Likewise, the business cycle was far more volatile before the US abandoned the gold standard altogether (“End the Fed” proponents seem to believe that speculative bubbles didn’t exist before central banking).

gold standard & end the fed & business cycle

wealth inequality federal reserve act of 1913
There is no correlation between the Federal Reserve and US wealth disparity

This focus on the Federal Reserve and the gold standard serves as little more than a distraction to the real problem: the wealth disparity between the top earners and everyone else.  The dollar is working just fine for them.  It’s everyone else, whose real wages have actually dropped over the last 30 years as unions have been dismantled and taxes on the rich have been lowered while our social safety net has been largely gutted.  This widening gap between the top 1-5% and everyone else has left most of that “everyone else” in the dust and their incomes barely able to rise relative to inflation.  And while it’s true that the Fed has printed/borrowed money, it’s important to keep in mind why; continued tax cuts (largely due to the false assertion from the right that tax cuts increase revenue) and contemporaneous increased in spending has led our government to keep charging the proverbial credit card.

The middle class as we know (or rather, knew) it was created during the late 30’s/early 40s as incomes became compressed after New Deal initiatives were passed.  The disparity in the 80’s when Reaganomics (lower taxes on the rich, union-busting, deregulation) kicks in.  The Fed, which was created in 1913 has nothing to with this.  The problem isn’t that the Fed is somehow devaluing currency.  After all, the rich are doing just fine with the dollar.  The problem is that more of these dollars are going to the top 1% and far less to everyone not in the top 10%.

wealth disparity  in america

This widened gap in wealth is largely specific to the United States, where Reaganomics has dismantled much of the New Deal initiatives which led to a middle class.

Wealth Disparity - United states vs canada britain france germany

The whole “blame the Fed” movement simply shifts the focus off the real problem and into a manufactured boogie man.

Further Reading

Fact and Myth
Leon McCloud is a prominent political blogger and commentator known for his insightful and thought-provoking analyses of political issues and economic trends. Born in 1985, Leon's passion for understanding the complexities of the political landscape began at a young age and has driven him to become a respected voice in the world of political discourse.