I’ve seen similar arguments as well. “What does it matter?” “The Chicken Little’s run around crying about the Fed and how the dollar has lost 95% of its value and yet incomes have gone up even more as has our standard of living…” “Would you really rather go back to days of horse and buggy and $29 gold?”
I think those arguments are fallacious, however. I think that it might be the fallacy of confusing cause and effect.
Think about a situation where someone had been on a roll since graduating from college. He got involved in an exercise program improving his strength endurance and flexibility in the process. He also did well in his profession, growing in knowledge and skills and had gotten a number of promotions and raises in salary and bonuses. But then he finds out he has a tapeworm. The doctor estimates he had it for 10 years or so. The doctor prescribes him some medicine to kill the tapeworm and rid him of this curse.
Would it make sense if some friends of his who had heard of his woes to try and talk him out of taking the medicine? After all, look at where he has gone since he got the tapeworm. Would he want to give up those promotions and raises? That might be his lucky tapeworm, and he’d better do what he can to protect it rather than get rid of it.
I think we really need to try and figure out whether the Fed has been a boon or a hindrance to the economy.
I think it is a false dichotomy to say we need to choose between where we are today with the Federal Reserve private banking cartel in charge of creating our money in an alliance with the Federal Government that they are funding, OR going back to the pre-1913 era.
The Fed didn’t invent vaccines for polio or cures for malaria and other dread diseases, nor computers, fax machines, the internet, jets airplanes, nuclear power, etc. It is absurd to give them credit for any and all advances in knowledge and technology since they came onto the scene.
I personally consider the Fed to be a parasite upon the economy and that growth has come despite their presence rather than because of it. We would be better off yet, had we had steady, sustainable growth rather than a seesawing back and forth boom and bust business cycle.
The Fed banking cartel siphons off their unholy profits via creating money out of thin air. That of course leads to inflation. Inflation is not good for business. Not long ago, I picked up a copy of Benjamin Graham’s “The Intelligent Investor” at the recommendation of several people. It’s considered a classic in the field. He contradicted what a number of investment advisors have claimed when they say that stocks are a good hedge against inflation. To an extent that may be true, but he had a few tables showing that when inflation took off, businesses often did relatively poorly. He also claimed that even though they seemed to recover some years later one needed to look beyond earnings per share. He noted that even though profitability did seem to catch back up to the newer inflated rate, (ie. if inflation had gone up by 7% or 8% per year for awhile, eventually profits started to catch back up), the companies were often in much shakier financial condition. They had grown the profitability but had taken on additional debt. His conclusion was that inflation was bad for businesses.
That makes intuitive sense to me. In an inflationary environment businesses are constantly having to negotiate and renegotiate prices with customers, suppliers and employees. Think of all the strikes companies must endure when prices are rising and labor unions are trying to renegotiate earlier contracts. Then when they finally get things settled their, the employees at a supplier’s factory go on strike and they get hit again. Similarly, I remember many years ago listening to my father explaining to customer after customer why their prices were rising so much. He certainly had valid reasons and most of his customers eventually came to accept the price hikes, but a lot of time was spent doing all of the explaining which could have been used far more productively.
It also makes planning a lot more uncertain and hence risky. Projections are always fraught with a new sometimes wildly fluctuating variable. How much inflation should a builder include in his cost projections when bidding on a new project that might take a few years to complete?
There was also a lot of waste with people buying things they wouldn’t have purchased otherwise, but they wanted to do so before prices jumped even further. Why put your money in savings if you can’t buy as much with it later, even with interest?
I remember reading that Argentina was a major world power prior to WWII but got itself into trouble with massive debts and a central bank that began to monetize that debt. Inflation turned into hyper-inflation and was instrumental in wiping their economy out. Argentina is an extreme case, but there are many other examples of countries that got completely out of control as their central banks found it only too easy to print money, especially as their debts grew.