The Federal Reserve Board was created by an act of Congress in 1913. Prior to its creation, there had been a number of dramatic and damaging economic cycles, including depressions, and it was believed that such a body would be able to manage the monetary elements of the economy in such a way as to either eliminate or minimize these dangerous swings.
In the intervening years, the Fed has had mixed reviews: Some have proposed that since the Fed didn’t stop the Great Depression, nor prevent recessions like the serious one we’ve recently experienced, it hasn’t lived up to its charter and should be eliminated. Others say that without the Fed, the economic cycles we’ve had would have been worse.
Today, some think we should abolish the Fed and return to the gold standard and use this underlying collateral for the U.S. currency as a better way to maintain price stability. But it’s important to point out that we’ve had economic cycles with: a) the gold standard and no Fed; b) the Fed and the gold standard; and c) the Fed and no gold standard. Small business owners just want a system that provides the best chance of adequate access to credit, low interest rates and low inflation.
It seems to me that the global economy is much too complex to just rely on the price of one or more commodities to manage price levels and monetary policy of the largest economy in the world. Perhaps the best system would be to keep the Fed for monetary policy and give it some support on price stability by reinstating the gold standard.
But I’m not the expert on this issue, and that’s why I turn to those who are, including two of my Brain Trust members, Dr. Robert McTeer and Wayne Allyn Root. Bob McTeer was the president of the Dallas Federal Reserve Bank and, therefore, a member of the Fed’s Open Market Committee. Currently, he’s a Distinguished Fellow with the National Center for Policy Analysis. Wayne Root was the 2008 Vice Presidential candidate for the Libertarian Party and is the author of The Conscience of a Libertarian.
Recently, I interviewed both of these men together on my small business radio program, The Small Business Advocate Show, where they discussed the relative merits and demerits of the Fed and the gold standard. Take a few minutes to listen to what they had to say. And, as always, be sure to leave your thoughts. Listen Live! Download, Too!