If you walked the streets, asking citizens the purpose of the Federal Reserve, my guess is that in any place other than a major financial district, not one-in-a-hundred people could tell you. Probably not one-in-a-thousand.
If I told you the Fed wasn’t even accomplishing what it was allegedly created to do—arguably making things worse—yet it was enriching and empowering bankers like those who lobbied to create the Fed 100 years ago, would it be a surprise?
Consider this paper from the Heritage Foundation: “Federal Reserve Performance: Have Business Cycles Really Been Tamed?”
The key points:
- The evidence suggests that the commonly held view that the Federal Reserve has positively contributed to economic stabilization in the U.S. should be reconsidered.
- Well-documented data deficiencies have caused key pre-Fed-era data to appear more volatile than previously believed.
- Although recessions were more frequent in the pre-World War I era than in the post-World War II period, this comparison omits roughly 30 years that included the Great Depression.
- When the entire Federal Reserve period is compared to the full pre-Fed period, the frequency of recessions has not decreased.
- Even when the interwar period is excluded, updated data suggest that the average length of recessions, as well as the average time to recover from recessions, has been slightly longer in the post-World War II era than in the pre-Fed era.
Based on this paper, the Daily Signal has published an infographic listing six reasons the Federal Reserve is not so great:
The Fed doesn’t do what it was sold to the country to do. It makes financial crises worse and creates significant “moral hazard” (leading people to undertake foolish actions they would not do, if the Fed didn’t exist).
How about we simply audit the stupid thing, and close it down?