When I entered the silver bullion business in 1973, few people knew what the Federal Reserve System was and what it did. Still fewer knew it was a central bank, and with little knowledge of what a central bank did. Those that knew the Fed existed knew that it expanded the nation’s money supply, which was watched closely by some astute investors. An expanding money supply was considered positive for the stock market, which correlates today to quantitative easing and investor expectations.
A commonly held belief was that there could be no more recessions, such as the Great Depression because the Fed stood ready to take “measures” to ward off such evils. And, there were then–as there are today–thousands of Fed defenders, mostly in academia, who stood ready to enumerate the Fed’s esoteric tools, such as the already mentioned money supply expansion via the Federal Open Market Committee (FOMC) but also changes in the re-discount rate, the Fed funds rate and reserve requirements for remember banks. Next to no one knew what fractional-reserve banking was.
“Fed talk ” is always laced in arcane terms that are meant to confuse rather than to enlighten, with the results being no greater understanding of what the Fed is and how it operates, and certainly not the danger it is. As Paul Carter noted in Keynesian economics debunked in one graph, defenders of the Fed and Keynesian economics love to use terms that confuse. However, today the Fed is under attack like never before, with Fed defenders having to go on offense because of the relentless attacks. (Ron Paul’s best-seller Audit the Fed played a major part in exposing the fallacious reasoning behind central banking.)
A recent defense of the Fed and its policies, titled 5 myths debunked about the Federal Reserve, was posted by bankrate.com. Over the next few weeks on this blog, I will expose the flaws in 5 Myths in an effort to enlighten readers about the true nature and purpose of the Fed, which the esteemed Murray Rothbard called “nothing but an counterfeiting machine.”
With inflation being the preferred solution to any and all economic and financial problems, gold and silver investors need to be fully informed about what the Fed really is and what it does. Reading 5 myths debunked about the Federal Reserve will give you an idea just how far Fed defenders are willing to go. Reading my reviews of 5 Myths will reveal just how weak those defenses are.