The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. It was established to provide the country with a safe, flexible, and stable monetary and financial system. However, like any institution, it has its proponents and critics. I make no bones about my perspective that I am a critic of the Fed and have written about this extensively here on the blog. At the core of my perspective is since the Fed was founded 109 years ago, the U.S. Dollar has lost almost 98% of its purchasing power. Since the value of our money affects everyone, I think it is time to recognize that the Centralized control of money has not been effective and potentially presents numerous obstacles to democracy. If you were to give your savings to a financial advisor and they would lose 98% of their value, chances are you would not value the advice that financial advisor was providing. In this article, I will explore the occasionally proposed case for abolishing the Fed.
Study the chart above which is maintained by the St. Louis Federal Reserve. The erosion of purchasing power, losing 4%-5% each year, is far from normal. It represents a silent tax imposed by the government, a form of theft that goes unnoticed by many. As the value of the currency diminishes, everything we seek to purchase becomes increasingly expensive. The hard-earned money we use to buy goods and services gradually loses its worth, leaving individuals and families struggling to maintain their standard of living. This insidious erosion of purchasing power is an unjust burden that undermines the economic well-being of the people.
In the realm of statistics, there is an intriguing branch called probability theory. Probability allows us to comprehend the likelihood of events occurring, enabling us to make informed decisions in various aspects of life. From predicting tomorrow’s weather to determining the outcome of a coin flip, probability surrounds us, empowering us to navigate the world with greater insight.
To calculate probability, we employ a fundamental principle: counting. While individual outcomes can deviate from our expectations, probabilities help us account for these variations and make more accurate predictions about the future.
Now, let’s reflect on the implications of these principles for our economic well-being. Since 1971, the U.S. Dollar has witnessed a staggering decline, losing 87% of its purchasing power. Over the course of the last 51 years, we have observed fluctuations ranging from as much as 9% to as little as 1% annualized erosion in the dollar’s value. These are not mere conjectures; these are undeniable facts. Considering this track record, what is the probability that the U.S. dollar will continue losing purchasing power next year, the year after that, and beyond? How does this trajectory impact your wealth?
Ignoring the performance metrics from the Federal Reserve is to turn a blind eye to the economic perils that lie ahead. With each passing year, the value of our currency diminishes, eroding the foundation of our financial stability.
In 50 out of 51 years we have had inflation. That is a track record of 98% of the time. The evidence is undeniable, and the implications are profound.
The end result of these metrics is that most people forced to use the currency created by the Fed will be poorer each and every year.
The cost of living will increase.
The currency will be debased.
And we will continue to hear exhortations about more debt creation from whomever is in charge at the Fed. These probabilities have become certainties in dealing with the Federal Reserve’s regular activities.
As a matter of fact, the Fed defines “normal economic activity” as 2% inflation. Imagine that.
Imagine a police force that defined “normal” as you having 2% of your wealth stolen every year.
Envision having a grocery store that defines “normal” as removing 2% of the contents from every product you purchase. Would you feel cheated and deceived?
Imagine hiring a contractor who defines “normal” as completing only 98% of the agreed-upon construction project. Would you accept their incomplete and unsatisfactory work?
I know how this movie ends….and with the currency having been debased 98% over the last 109 years you don’t need to be a rocket scientist to know that it doesn’t end well.
110 years ago, a home cost $3,000.00 or 150 ounces of gold.
Today, the average home costs $300,000 or roughly 150 ounces of Gold.
Gold has maintained its purchasing power while the value of the Dollar has been decimated. This has all occurred during the Federal Reserve’s reign as manager of the economy and currency.
In a healthy economic environment, falling prices should be the natural outcome of technological advancements and increased efficiency. Technology has the power to revolutionize the way we work, increasing productivity and output while reducing costs.
Tasks that once took days or weeks can now be accomplished in a fraction of the time, thanks to automation and advanced systems. This enhanced productivity should translate into lower costs for manufacturers, allowing them to pass on those savings to consumers in the form of lower prices.
However, when prices continue to rise despite technological progress, it is a sign that something is amiss. It indicates a broken system where the benefits of efficiency and productivity gains are not being passed on to the general population. Instead, the currency is being debased at a faster rate than technological advancements can compensate for. This inflationary pressure erodes the purchasing power of individuals, making it increasingly difficult to maintain a decent standard of living.
It is imperative that we address this issue and reevaluate our economic systems to ensure that the benefits of technological progress are shared widely. We need a healthy economy where falling prices become the norm, allowing individuals to stretch their hard-earned money further, encouraging consumption, investment, and economic growth. Embracing technology and its potential for efficiency gains should not result in a rising cost of living. Instead, it should lead to a brighter future where the benefits of innovation are felt by all, creating a more prosperous and equitable society. We are living in the throes of the greatest technological revolution our civilization has ever seen, and in spite of our technological progress our money is still supremely broken.
Proponents of the Fed argue that the Central Bank is necessary to effectively manage our complex economy. Whenever I hear this argument, I often realize that most people are completely unaware that the Federal Reserve as the Central Bank of the United States is our nation’s third attempt at Centralized Economic Planning. The two previous central banks in the United States were the First Bank of the United States and the Second Bank of the United States.
First Bank of the United States: The First Bank of the United States was chartered by the U.S. Congress and signed into law by President George Washington on February 25, 1791. It operated for a period of 20 years, from 1791 to 1811. The bank’s purpose was to serve as a central banking institution and help stabilize the nation’s financial system.
Following the expiration of the charter of the First Bank of the United States, the Second Bank of the United States was established. It received its charter on April 10, 1816, under President James Madison. The Second Bank operated for a period of 20 years as well, from 1816 to 1836. Like its predecessor, it aimed to regulate the currency, control inflation, and provide stability to the U.S. banking system.
Both the First Bank and the Second Bank faced opposition and controversy during their existence, with critics arguing against their constitutionality and concentration of financial power. Eventually, the charter for the Second Bank of the United States was not renewed, and the U.S. operated without a central bank until the establishment of the Federal Reserve System in 1913. Both of these attempts at Central banking faced opposition from those who believed it granted excessive privileges to a few financial elites and undermined state banks’ authority. Critics argued that it concentrated too much power in the hands of the federal government and violated the principles of limited government.
These institutions were not renewed due to concerns over their influence on the economy, perceived corruption, and its perceived interference with state banks. Opposition to the central bank also stemmed from political and ideological differences, with some viewing it as an unconstitutional extension of federal power.
Here is a very simple question to proponents of the Fed.
Why has the Fed never been audited? The purpose of an audit, in its simplest terms, is to assess and verify the accuracy, integrity, and compliance of financial information and processes. It involves an independent examination of records, transactions, and controls to ensure they are reliable and in accordance with established standards, laws, and regulations. The primary goal is to provide assurance to stakeholders that the information presented is trustworthy, transparent, and fairly represents the entity’s financial position and performance. Audits help identify any discrepancies, errors, or potential fraud, enhancing accountability, transparency, and confidence in the audited entity’s operations.
The Fed is the most powerful institution in the world and yet no one has ever been able to inspect its books, processes, and procedures for integrity. We are talking about trillions of dollars passing through this institution. In the absence of an audit the Fed is incapable of silencing its critics who often voice theories and perspectives that are rooted in impropriety and unethical behavior. Since the 1980’s critics of the Fed have argued that the Fed as the buyer of last resort has quietly supported financial markets to endorse the efficacy of its policies. The fed could easily and quickly put these arguments to rest by simply agreeing to a full-fledged audit.
The argument for auditing the Fed stems from the desire to ensure transparency, accountability, and to address any potential improprieties.
Critics of the Fed argue that auditing the Federal Reserve would increase transparency and provide the public with a clearer understanding of its decision-making processes. They believe that as a public institution with significant influence over the economy, the Fed should be subject to the same level of scrutiny as other governmental agencies. Critics contend that auditing the Federal Reserve would enhance democratic oversight. They argue that the decision-making power of an unelected institution affecting the economy should be subject to examination by elected representatives, ensuring that the Fed remains accountable to the public. Critics express concerns about potential improprieties or misuse of power within the Federal Reserve. They argue that conducting audits would act as a safeguard against any hidden or inappropriate actions that could potentially harm the economy or undermine public trust.
Many critics highlight the need for audits to identify potential conflicts of interest within the Federal Reserve. They argue that transparency through audits would help uncover any undue influence or connections between the Fed and private entities that could compromise its independence and decision-making and would shed light on how the Federal Reserve’s policies may contribute to economic inequities. By evaluating the impact of monetary decisions, audits could identify whether certain groups or sectors benefit disproportionately from the Fed’s actions, potentially exacerbating income inequality. Critics emphasize the importance of audits in verifying that the Federal Reserve complies with laws, regulations, and its own mandates. Regular audits could help detect and rectify any potential deviations or noncompliance.
In the absence of an audit, how is it that the public at large is supposed to trust, or believe in the actions of a Nation’s Central Bank?
If we study the evidence of the last 14 years, the Fed clearly favors the “too big to fail” banks against their smaller regional competitors.
Over the past few months, you might recall that our country was gripped by a banking crisis which saw several prominent banks fold. Among the top banks to fail was Silicon Valley Bank and Signature Bank. Both institutions catered to innovative startups many who were directly involved in the cryptocurrency space which threatens the Feds monopolistic control of money and economic activity. There are currently over 23,000 cryptocurrencies in existence. Love them or hate them this sector of technological innovation has been dedicated to building a better, fairer, more effective, and trustless financial ecosystem over the past decade. I find it curious that the Fed and now the Securities Exchange Commission are doing everything in their power to destroy the cryptocurrency space.
In a world dominated by monopolistic powers, the rise of cryptocurrencies and altcoins presents a transformative opportunity to unleash the power of free market forces. These digital assets, driven by innovative technology, offer individuals the chance to escape the clutches of centralized authorities and access a financial system that delivers better value, efficiency, and choice. Making that point, I am completely aware that many of these altcoins and cryptocurrencies will fail for many reasons. But what has become very clear to anyone who is paying attention is that the Fed does not believe in free markets or competition to deliver the highest and best value. The Fed exists only through legislative privilege which is the antithesis of free markets.
Cryptocurrencies, such as Bitcoin and various altcoins, operate on decentralized blockchain technology, removing the need for a central authority like the Federal Reserve to control or regulate the currency. This decentralization fosters transparency, trust, and direct peer-to-peer transactions, empowering individuals to engage in borderless, fast, and cost-effective exchanges. By embracing cryptocurrencies, people are embracing the fundamental principles of free market competition, allowing multiple digital assets to vie for users’ trust and adoption based on their technological merits, utility, and value proposition.
By permitting free market forces to operate, we unleash the power of innovation, as developers and entrepreneurs create new altcoins, decentralized applications, and financial services that challenge traditional banking models, introducing competition, efficiency, and improved user experiences.
In this new paradigm, financial inclusion becomes a reality. Cryptocurrencies have the potential to provide financial services to the unbanked and underbanked populations, overcoming barriers such as geographical limitations and lack of access to traditional banking infrastructure. With just a smartphone and an internet connection, individuals can participate in the global financial ecosystem, sending and receiving funds, accessing loans, and engaging in economic activities previously out of reach. By embracing cryptocurrencies, people are empowering individuals to take control of their financial lives, free from the constraints of monopolistic powers and limited choices.
The time has come to challenge the status quo, where centralized authorities dictate our financial lives. Embracing alternative monetary systems and altcoins as vehicles for free market competition will unlock new possibilities, driving efficiency, choice, and financial inclusion. Let us seize this opportunity to empower individuals and reshape the financial system into one that aligns with the principles of a free market, delivering better value to users through innovation, transparency, and the transformative potential of technology.
The bottom line here is that the Fed is not accountable to the American people. Was anyone held accountable for the failures of the Great Financial Crisis? How about QE1? QE2? QE Infinity? Yet in spite of these horrible policies, we have seen the purchasing power of our currency worsen.
Discover the Power of Artificial Intelligence for Traders
Artificial intelligence (A.I.) has transformed our world, revolutionizing the way we live, work, and interact. From enhancing medical testing to optimizing transportation logistics, A.I. has brought efficiency and effectiveness to our daily lives. It has even granted robots the ability to understand and execute spoken commands. With facial recognition and deep learning capabilities, A.I. has advanced at an astonishing pace, paving the way for incredible achievements.
In this era of rapid A.I. evolution, human thinking and decision-making are being revolutionized. A.I. can swiftly process and analyze vast amounts of data, outperforming humans in making informed decisions. As a result, businesses across industries, including healthcare, finance, and robotics, are leveraging A.I.’s potential for complex tasks. The integration of A.I. in autonomous vehicles has enabled quicker detection and avoidance of obstacles, surpassing human capabilities.
For traders navigating the financial markets, data overload is a constant challenge. Enter artificial intelligence, which not only swiftly collects and analyzes data but also predicts future trends and fluctuations. With its unrivaled ability to process vast amounts of updated data, A.I. empowers traders to gain insights into trends faster and more reliably than ever before. Advanced A.I. algorithms provide traders with the advantage of swift action on potential opportunities while reducing risks—an essential aspect of successful trading. By leveraging A.I., traders can outperform the competition, make accurate predictions, and achieve their goals with greater efficiency.
Consider the countless victories of A.I. in games like Chess, Poker, Jeopardy, and Go. Trading is no exception to A.I.’s prowess. As A.I.’s capabilities continue to expand, experts predict it will master increasingly complex tasks traditionally requiring human expertise. It’s only a matter of time before A.I. outperforms humans in any given task or game, no matter the complexity.
So, what is your best chance to succeed in today’s financial markets? The answer lies in harnessing the power of A.I. Discover how artificial intelligence, machine learning, and neural networks have become indispensable in safeguarding your portfolio. Don’t miss out on the surprising opportunities A.I. can uncover.
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A.I. combined with neural networks are exactly the types of analytical horsepower you need to stay on the right side of the right trend at the right time.
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Artificial intelligence is so powerful because it learns what doesn’t work, remembers it, and then focuses on other paths to find a solution. This is the Feedback Loop that is responsible for building the fortunes of every successful trader I know.
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