Federal Reserve Essay
In fact, the money stock is approximately 103 times greater now than it was in 1914, the first full year of the Federal Reserve’s operations.Well sure, some might say, the Fed had to increase the money supply in order to maintain price stability, because during this time the demand to hold money increased as well.Bad investments, however, are not made economically sound merely because there is more money in existence.These bad investments eventually must be liquidated.Monetary inflation is unsound for both economic and ethical reasons.
Increasingly whenever tragedy strikes, be it a natural disaster such as Hurricane Katrina or criminal wickedness such as mass murder, the American masses turn to the state to soothe their anxiety and solve their problems.
As indicated by the data above, inflation merely results in higher prices.
Increasing the money supply does not spontaneously increase the stock of land, labor, or capital goods.
Before the Fed was created in 1913, it was sold to the public as a way to provide an “elastic currency,” meaning that when the economic going got tough, it could increase the money stock, thereby greasing the wheels of exchange.
Since its inception, the Fed has been increasing the quantity of money virtually continually.