Before reading this book, I knew that some people had problems with the Federal Reserve. Something about it not being accountable for its actions and causing inflation. I had heard how Alan Greenspan would make his indecipherable remarks and how the markets would react to his doublespeak. Reading this book by Ron Paul gave me much more of the history of the Federal Reserve and how it has influenced the money of the United States.
Ron Paul starts with the history of the Federal Reserve. He describes its role as an extra-governmental organization empowered by Congress in 1913. The Fed is composed of representatives of the large mega-banks in the US. They hold meetings in secret, their most important activities are protected by law from audit, and they are accountable to absolutely no one for their actions. They can create and extend credit to anyone they choose, including foreign banks and governments.
The next sections talk about the detrimental effects of our current fiat money system in the US. The bottom line is that in the early 20th century the US dollar was nominally linked to gold – the government would give you a set weight of gold or silver for a dollar (for a period of years it was set to $35 dollars per troy ounce of gold – imagine that!). Coin money before 1965 had a set percentage weight of silver in them, so the coins were worth something in and of themselves. In 1971 the government completely abandoned the then nominal link between the dollar and gold. Now the only value to our dollar is the good will it has – it is valuable because people will accept it as a medium of exchange.
This delinking of the dollar has unleashed the power of the Federal Reserve on our economy. The Federal Reserve can create credit, or money, at will and distribute to whomever it wants. Therein lies the rub. Since the Fed can create money whenever it wants, and give it to whomever it wants, inflation occurs because there are now many more dollars chasing a relatively same amount of goods. The government can pay its bills and fund war efforts through stealing from everyone. Yes, inflation is thievery of the most insidious nature because it attacks the buying power of every dollar that exists.
This other graph from the book illustrates this point as well.
Ron Paul goes on to devote more time to give specific arguments for individual moral and economic cases against the Fed’s existence.
The only part I would have enjoyed reading more was how he would propose to do away with the Federal Reserve. Ron Paul seemed to be pretty realistic, stating it would not happen all at once and that there would be a transition period.
All in all, a worthwhile read, but not good for late night reading – the realization that your money is being stolen out from under you will either make you mad or make you worry – either way you won’t sleep.