Most investors buy gold because of what the Federal Reserve System, the Fed in today’s lingo, does, which is inflate the money supply with paper money. Sadly, the history of paper money, when not linked to gold or silver, is printed until it is worthless. Yet the average college graduate, and even the nongraduate who regularly reads Establishment publications such as The Wall Street Journal, readily accepts any and all Fed actions. To them, increases and decreases in the money supply, or raising and lowering interest rates, are part and parcel to the Fed.
After all, we’re told, it’s the Fed’s mandate to “manage the monetary system,” making sure that there is “adequate liquidity,” that interest rates are “right” to keep the economy growing. The Fed is so ingrained in the public psyche that most Americans think that world commerce would not exist if the Fed and the world’s other central banks did not exist.
The only Establishment knocks you will hear against the Fed are whether the Fed is “moving in the right direction” or “moving fast enough.” No Establishment figures question the Fed itself, just as nowhere in Establishment publications will you read about the dangers of central banking. To learn about the how the Fed truly works and the dangers inherent in central banking, you have to go to such organizations as www.mises.org, the world’s premier proponent of Austrian Economic Theory.
At mises.org you can find publications and articles that explain the most esoteric aspects of Austrian Economy Theory. Some of the writings are for economists, but some are for laymen. For starters, I recommend a few short books, such as The Case Against the Fed, The Case for a 100% Gold Dollar, and What Has Government Done to Our Money?, all of which were written by the late Murray Rothbard. Rothbard’s seminal work is America’s Great Depression, which is an excellent expose of the Fed’s culpability in causing the Great Depression. Hans Sennholz’ Age of Inflation is also an excellent primer on inflation.
Of course, there are numerous websites that relentlessly attack the Fed, but for investors seeking to be educated about money and central banking www.mises.org is the site. Another site is www.lewrockwell.com, appropriately named after Lew Rockwell, who also heads mises.org. The difference between the sites is that mises.org sticks with Austrian Economic Theory and criticisms of other economic theories while lewrockwell.com gets political with some articles. Lewrockwell.com also links to interesting articles completely unrelated to either economics or politics, which makes the site interesting.
A frequent contributor to lewrockwell.com is Gary North, who is a huge critic of central banking. In my August 24th post, I linked to a North article about the Fed’s culpability in the subprime mess. Since then, lewrockwell.com has posted two additional Gary North pieces on the Fed, The Moral Hazard of Central Banking and The Ultimate “Success through Failure Manual.” Despite North’s wanderings, both are educational. (When North wanders, skip to the next section.)