Today on CNBC they said one could make a pile of money if one could guess when they would raise rates again. This highlights one of the biggest atrocities in the World’s economic system. Trillions of dollars are tied up in the currency futures, hedging the wild swings in the value of currency, trillions that could be invested in productive activities, if only the world had a stable unit of account. The price of commodities didn’t budge an inch from 1920-1971, 51 years of the greatest economic growth in world history. Then in 1971, at the urging of the monetarists, Nixon closed the London Gold window. Gold was $35 an ounce then, and oil was $3.50 a barrel. Inflation is not a natural occurring phenomenon, and especially not due to growth and prosperity. The only thing that causes inflation and deflation is an imbalance in the amount of liquidity in the system, a balance that is the single and only charter of the Federal Reserve. It is a failure of epic proportions.
I was so excited. This is the email I wrote to her:
Perhaps the largest problem in our and the World’s economy is an unstable unit of account, the wild swings in the value of our money. The sole charter of the Fed is to stabilize our unit of account and yet in a misguided effort, they do just the opposite: they cause the wild swings which result in inflation and deflation that reek havoc on the economy. All that has to be done is for them to target the gold price instead of targeting the interest rate. When the price of gold becomes to high, they should sell bonds to soak up the excess liquidity. When the price of gold becomes too low the can inject liquidity by printing. If they just followed this one simple rule there would be no more inflation or deflation, and the economy would have exactly the amount of liquidity that it demands. I also worry about the ever increasing amount of regulatory power they are being given. They should be reigned in and held accountable, not given more unaccountable power. If they are indeed a branch of the government, they should work for the people and be held accountable to the people and its representatives. If they are not, then the Congress should take back its Constitutional authority to coin money.
Thank you again,
Little Rock, Arkansas