Liberty Maven

The Cato Institute has reprinted an article written by Richard Rahn which originally appeared in the Washington Times last week.  The article questions whether or not the Fed has performed it’s assigned task since it was created in 1913.  The answer, not surprisingly, is an unequivocal NO.

When considering whether the Fed should be kept, or at least kept in its present form, it is always useful to look at the data. Specifically, what happened in the 94 years prior to 1914 (when the Fed became operational), and what happened in the 94 years since 1914?

The United States was on the gold standard in most of the years prior to the Fed, and there was no systemic inflation over the century before the Fed. There were some periods of inflation (during the Civil War) and a sustained period of deflation in the 1890s, but wholesale prices were nearly the same in 1914 as 100 years earlier. (Note: There are reasonably reliable wholesale and/or producer price numbers from the late 1700s, but the consumer price index [CPI] did not exist in the 19th century. The CPI has grown by more than 2,000 percent since 1913, meaning the typical item that cost $20 back then would now cost more than $400.)

It is unambiguously clear that the Fed has failed in its charge to maintain a stable price level.

Go read the whole article at Cato.org.