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The Federal Reserve Has Failed Miserably

Posted by Larry Doyle on January 25, 2010 8:46 AM |

How are we to judge the Federal Reserve? The Fed by its very nature has been an opaque institution. What truly goes on behind the closed doors of the Fed? What are the relationships amongst the Fed Chair and Fed governors? How about the relationships between Fed representatives and political operatives?

While volumes have been written about the history of the Fed, to the American public the Federal Reserve remains a mystery. How can we lift the veil on this mysterious institution? Let’s “kiss” the Federal Reserve. What? Oh no, LD, where are you going with this? Let’s plant a big “kiss” on the Fed. That is, keep it simple stupid.

What are the mandates of the Federal Reserve? In the Fed’s own words, the primary mandate of the Federal Reserve from its inception in 1913 has been:

“conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices (LD’s emphasis), and moderate long-term interest rates.”

How is the Federal Reserve doing in pursuit of these stable prices? Thanks to Michael Panzner who, in my interview with him last evening on NQR’s Sense on Cents with Larry Doyle Welcomes Back Michael Panzner, pointed out that the Fed has failed miserably in its pursuit of stable prices. Panzner specifically highlighted that the dollar has lost 95% of its purchasing power since the Federal Reserve was founded in 1913.

I will admit that I found that number shocking! Major high five to a loyal Sense on Cents supporter who listened to last night’s show and then did a little homework of his own to check Panzner’s statement. He wrote to me after the show and provided an interesting link. What do we learn from The Inflation Calculator?

What cost $1000 in 1913 would cost $21520.32 in 2008.
Also, if you were to buy exactly the same products in 2008 and 1913, they would cost you $1000 and $47.10 respectively.

Rest assured, the Fed would spin this number so hard that America would vomit from the motion sickness. The Fed’s excuses may only be rivaled by the nation’s middle school students who lost their homework to the voracious appetite of the family dog.

Regardless of how anybody spins it, a grade of 5 (we’ll round the 4.7 up) is a failure. Are greater failures approaching Zimbabwean magnitude to come?

Might the members of Congress care to question Mr. Bernanke on this? No dog excuses allowed.

Thank you Mr. Panzner for bringing this to our attention. Thank you WB for verification.

What do you think about the Fed now?


  • Mike

    Stable?? Hardly.

    Inflation is the ‘status-quo’. Most people believe that prices will always rise, and that stable (or declining) prices over long periods of time are unrealistic and irrational.

    Well, I guess when more money gets pumped into the system this is what you get. I can’t wait to see what the price of a movie ticket is in 2017 when debt ceiling is at $20T and tax rate is 50% for all citizens.

  • ed lewis

    That works out to be about 3% per annum inflation.

    • Bill

      Pretty amazing how compounding works.
      The inflation calculator also reveals
      that the reverse was in operation prior
      to the Fed’s appearance. What would have
      cost $1,000 in 1800 would have cost
      $570 in 1912.

    • therooster

      Even at 3% , that debt cannot be paid off (p&i). It can only be redistributed. Assets have to enter into circulation, such as gold or fully gold backed deivatives (such as digital title) in order to service existing debt while not killing liquidity. Assets are the only route … the ONLY ROUTE !

      That empowerment is in the hands of the marketplace via the use of fully gold backed payment processors. It’s a bottom-up solution, not top-down.

  • Oh NOW you are talking!!!!

    Plus don’t forget what they hide, which is, um, well–EVERYTHING they do! Nine trillion worth of it:

    If Bernanke is the best man for this job then pigs fly. I am so hopping mad that more senators don’t WAKE UP and kick him out on his keister. Check out the list of the wishy washy pandering senators:

    Americans do not deserve this level of incompetence, ignorance and corruption currently representing them.

  • robertsgt40

    The FED has only been a failure if you believe their “stated” reasons(of their mission) as opposed to their real reasons. The real reason for the creation of the FED was to transfer the wealth of the nation into a few private hands. That has been an overwhelming success. The downside is it will leave the country living in third world levels. Mission accomplished. This will continue until the citizens take their wealth back. It won’t be pretty.

  • Ernest

    The US does not need a central bank.

    Far from fighting inflation the FED
    is the author of all US inflation.

    It caused the Great Depression,
    the Volker Recession, and almost
    every other recession in the 20th

    It was founded by Zionists who got
    the US into world war I for the
    purposed of destoyring the Ottoman
    empire so that the state of Israel
    could be created.

  • oldbat

    failed? ARE YOU KIDDING? the federal reserve has accomplished EXACTLY what it was formed to do: destroy our country.

  • Stephan Larose

    “I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson

    Every dollar the U.S. receives from the Fed, from any bank, is a dollar of debt. But where did that debt come from? Do any assets back it? The answer is no. All Debt is created out of nothing by private institutions, what is for the average citizen counterfeiting, is for them not just legal, but the basis for bank ownership of most assets on the planet.

    The simplest way to right the economy is for government (taxpayers) to print money, instead of issuing bonds which the Fed turns to debt and loans to the government/banks. That way, there is no national debt, and no need for income tax of any kind.

    What the Fed does, government can do at no cost, no interest, no debt. Inflation is reduced when government keeps spending at the rate of population growth and commercial banks are no longer allowed to counterfeit money through the use of fractional reserve lending. Banks, by inflating the money supply this way, suck the economic life out of the country by creating 90% of inflation, while the Fed saddles the country with unsustainable debt it creates out of thin air but expects paid back from real value created by the taxpayers.

    Kill this evil institution and restore the power of issuance to congress as mandated in the U.S. constitution, and (barring total corruption) your financial woes are cured.

  • Gee Jay

    I think what we all have a real hard time understanding is the amount of lever pulling the Fed or any institution for profit would have to do to keep a country running that’s hell bent on eliminating revenue via tax cuts, over spending receipts on a yearly basis to the point of insurmountable deficit, borrowing unfathomable amounts of global savings, devaluing it’s currency by over printing (counterfeiting), market rigging, bucket shops and just plain steals from our Social Security Trust fund (some trust). You can blame anything for our failures and then keep electing these crooked, self important politicians that go to extreme lengths to hijack the nation’s future solely for their re-election. Fiscal responsibility be damned, pay as you go never to return, bright red light on dash on; US politicians are the reason they devaluate.

  • “US politicians are the reason they devaluate.” …Gee Jay

    Then what did Mayer Amschel Rothschild mean
    when he said:

    “Give me control over a nation’s currency and
    I don’t care who makes the laws.”

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