Federal Reserve Still Inflating the Money Supply

As has been pointed out by myself and many economists the Federal Reserve is dramatically increasing the monetary base. What does this mean? If the Great Depression is indicator inflation with high unemployment as the federal government continues to “crowd out” the private sector in its insatiable appetite for good and services. The ultimate end game is fascist control over the economy like that which occurred in America and Germany in the 1930’s.

Monetary Base

Obama and the democrats have authorized another trillion or so of debt. Soon we will be approaching 100% debt of the yearly GDP. That would be the same as me making $100,000 and owing $100,000. Not such a bad thing if the debt was over a long period of time but in the past year the Federal Reserve has had trouble selling long term bonds. Most have been seven years or less. To further compound the problem the current administration is looking to raise taxes. This will stunt economic growth. As the pool of taxpayers dwindles more and more of this burden will be carried by fewer and fewer citizens. Income inequality will go down because there will be less prosperity. This will be celebrated by Obama and fascist economist like Paul Krugman as a great victory. There will be less rich people and more equality.

And that is the goal “equality” and power. Everyone knows the scenario. Thanks to Glen Beck and Neal Cavuto if people want it they can get a pretty decent overview of the game plan of the fascist. None of this is new. What will we do about it?

At a recent political gathering I was asked about the Federal Reserve and its function. Alex Jones and his crowd have been demonizing the Federal Reserve and is a proponent of putting the Fed under congressional control. This would be the worst possible scenario possible. Congress would print and spend every election cycle.

The gold standard? A lot of economist favor going back to the gold standard. And it has its merits. The problem though is you are tied to gold so as the commodity, like all commodities, gyrates up and down against the world of currencies your imports and exports gyrate along with the currency. When gold is high imports are cheap and exporting industries are hurt. When gold is low exports are helped and imports expensive. Not the most stable position for a country to be in.

MZM Money Stock. Did you get a 20% raise in 2008?

Regional banking worked from 1836 to 1913. Yes there were problems but we had a competitive banking system. Instead of the monopoly Federal Reserve a receivership bank could be set up to monitor reserve requirements and currency stocks. When there is a failure the receivership bank would liquidate assets and reimburse a set percentage of bank holdings below 100% of value but more than 80%. The loss of value would partially eliminate moral hazard conflicts. After closure and investigation of the failure if banking laws were broken the guilty would be charged and jailed. This system would be much more competitive and currency would not continually lose value like under our current system. According to Dan Mitchell of the Cato Institute we have lost 92% of the value of our currency since the Federal Reserve was formed in 1913.

Finally if the Federal Reserve is to be maintained congress should restrict its operations. Set the reserve requirement once and print money at say 4% increase plus or minus 1%. No fed funds, no discount window. Remove the Federal Reserve from all functions except to increase the money supply 4% in good times and bad.

My 2 cents on the Federal Reserve. Also according to these Federal Reserve charts the inflation rate looks to be going to 20%. What a shocker. The inflation rate during the FDR years varied on various commodities about 10% to 15%. Hmmmm. Are these guys that good?