The Mission Statement of the Federal Reserve, as stated on their website, is "...to provide the nation with a safer, more flexible, and more stable monetary and financial system."

Below is a graphical representation of the fall in value of the U.S. dollar since the Federal Reserve took control of the monetary system.

Sources: Consumer Price Index from the U.S. Bureau of Labor Statistics and U.S. Currency in Circulation from the U.S. Federal Reserve

I would like to ask the U.S. Federal Reserve what their definition of the word "stable" is.

In the first seven years of providing the nation with a "more stable monetary system", the U.S. dollar lost one-half of its value. Today, the U.S. dollar is worth less than a nickel was in 1913!

The Federal Reserve was created on December 23, 1913 with the signing of the Federal Reserve Act by President Woodrow Wilson. According to the Federal Reserve website "...it is an independent entity within government, having both public purposes and private aspects."

Congress has authorized the Federal Reserve to manage the nation's money supply. There has been a great deal of controversy regarding the establishment of the Federal Reserve on the grounds that it is unconstitutional. Under Article 1, Section 8, it is stated that only "...the Congress shall have power...to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures."

Although there is a growing awareness of what government has done to the dollar, the vast majority of Americans seem blissfully unconcerned that this unbacked piece of paper can be printed without limit. The Federal Reserve Note used today is not the dollar envisioned by the Founding Fathers. The U.S. dollar was defined in the Coinage Act of 1792 as being 371.25 grains of pure silver. Today we treat this paper note as if it were actual money.

This is a mistake.

A "note", according to The Dictionary of Banking Terms, 4th Ed., by Thomas P. Fitch, is "legal evidence of a debt or obligation." What we think of as money today is not an asset as it was during the time when it was backed by something tangible such as gold or silver. Instead it is a representation of debt, an "I.O.U. nothing" as John Exeter once said.

Central banks around the world have been creating trillions in face value of unbacked paper notes.

When central banks create more unbacked money "out of thin air" they do not create wealth. What this newly created money does is redistribute wealth to those who receive it first. Those lucky enough to receive the dollars first are able to spend them at face value. Those who receive them later do not benefit as prices have already risen in response to the increased supply of money. Those who receive very little of the newly created money only feel the effects of an increased cost of living.

Click here for a related video on this topic.

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© 2009 DollarDaze

ABOUT THE AUTHOR

Mike Hewitt is the editor of DollarDaze.org, a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies. His website also provides a no-cost market data feed service with up-to-date quotes on currency exchange rates, commodity prices and major indices. Mike can be emailed at mikehewitt@hotmail.com.

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