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?