As The Fed Turns 109, The Purchasing Power Of The U.S. Dollar Has Eroded Over 96% Since Its Inception Cointelegraph

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109 years ago the US Federal Reserve was created and since that day the purchasing power of the US dollar has declined significantly. Since the creation of the Fed, more than 96% of the purchasing power of the greenback has been erased by inflation.

The purchasing power of the US dollar after the creation of the Federal Reserve on December 24, 1913 is declining

For the past hundred years, economists have blamed the US Federal Reserve for much of the rising inflation in the United States. American economist and social theorist Thomas Sowell called the Fed a “cancer” and former politicians like Ron Paul called on the masses to abolish the Fed. Before the creation of the Fed on December 23, 1913, America had two central banks that preceded the current US central bank.

The first American central bank started in 1791 which was the first bank of the United States, a financial institution charted by Congress at the time. The second attempt to establish a central bank in America dates back to 1816 with the formation of the Second Bank of the United States. The third central bank is the current financial institution we know today as the Federal Reserve and it was officially established 109 years ago just before Christmas Eve.

Because of the Panic of 1907, Americans at the time were convinced that a central bank was necessary. A secret series of meetings on Jekyll Island that included America’s top financial elites and the so-called “Money Trust” laid the foundation for the Federal Reserve system. The American people have been kept in the dark about the meetings between Senator Nelson Aldrich and “House Morgan”.

The secret Jekyll Island meetings took place on November 20, 1910 and November 30, 1910. The House of Representatives passed the Federal Reserve Act on December 22, 1913, the United States Senate passed the law the next day, and President Woodrow Wilson signed the law on Christmas Eve. Since then, the greenbacks that Americans use, which purports to be a “promissory note” backed by the US Federal Reserve, have lost considerable value.

Moreover, some would say that “only if the rate of expansion of money exceeds the rate of increase in the production of goods will we have a general increase in prices”. However, some people would also insist that other types of government interference like irrational spending, sanctions, and regulations can cause the price of goods and services to rise abnormally.

Statistics show that between 1913 and 2017, the US dollar lost more than 96% of its purchasing power, according to the American Enterprise Institute. Measurements from 2022 show that $1 in 1913 equals about $30.07 in purchasing power today. A report states: “The dollar has had an average inflation rate of 3.17% per year between 1913 and today, producing a cumulative price increase of 2,907.18%”.

A report published by visualcapitalist.com last year explains how you could buy ten bottles of beer in 1933 with just one greenback and today you’d be lucky to get a little coffee for that dollar. Since 2020, inflation has skyrocketed as the US Federal Reserve has increased the money supply by a massive amount over the past three years.

Visualcapitalist.com author Govind Bhutada explained that “the money supply (M2) in the United States has exploded over the past two decades, from $4.6 trillion in 2000 to $19.5 trillion. dollars in 2021″. He added that “the effects of increased money supply were amplified by the 2008 financial crisis and more recently by the COVID-19 pandemic – In fact, around 20% of all US dollars in money supply , $3.4 trillion, was created in 2020 alone.

The war between Ukraine and Russia drove energy prices much higher as a large number of Western countries like the United States imposed sanctions on Russia. The sanctions, in turn, have driven up oil and natural gas prices, as Russia is one of the world’s largest suppliers of fossil fuels. Additionally, US government officials have imposed a lot of red tape on companies that do not follow so-called climate change reform.

Between US government military spending, the Fed’s massive increase in monetary M2 since 2020, and sweeping climate change regulations have all contributed to rising prices across the country. That’s why free-market proponents love alternatives like precious metals and cryptocurrencies. Precious metals, for example, are rare and cannot be printed on a whim like fiat currencies.

Metals like gold and silver also have intrinsic value, as they are widely used for things like jewelry, computer parts, and coins. Although precious metals and fiat currencies can be cumbersome in their physical form, as holding a large amount of gold or stacks of US dollars requires some kind of security and secrecy. Cryptocurrencies like bitcoin (BTC) are also rare and also cannot be printed on a whim like promissory notes.

Crypto assets like bitcoin are more portable and although they need security and privacy, the cost to do so is negligible. These two types of alternative currencies have not lost value like fiat currencies around the world over the past 100 years. The data clearly shows that the US dollar cannot be a store of value for long. As the economist Friedrich A. Hayek once said, good money cannot exist until it is removed from the state.

“I don’t believe we’ll have good money again until we take the thing out of the government’s hands, which is to say we can’t violently take it out of the government’s hands, whatever we can do is some devious, underhanded way of introducing something that they can’t stop,” Hayek said.

Tags in this story climate change, Fed, Federal Reserve, Govind Bhutada, Greenback, House of Morgan, inflation, Jekyll Island, M2 monetary increase, money supply, Money Trust, Panic of 1907, Purchasing power, Regulations, Sanctions, Ukraine-Russia War, US Central Bank, US Dollar, US Federal Reserve, USD, visualcapitalist.com, Woodrow Wilson

What do you think of the fact that the US dollar has lost more than 96% of its purchasing power since the creation of the Fed? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the news manager for Bitcoin.com News and a fintech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written over 6,000 articles for Bitcoin.com News about disruptive protocols emerging today.

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