John Maynard Keynes, in his book The Economic Consequences of the Peace, cites Vladimir Lenin as saying that “the best way to destroy the Capitalist System [is] to debauch the currency.” Keynes went on to state that: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” Unfortunately, Keynes later in his life endorsed exactly such debasement of money, establishing a school of economic thought that today maintains a stranglehold over the worldwide system of money and banking.
That Keynesian school has influenced the policies in which the Federal Reserve has engaged since the onset of the financial crisis in 2008, accelerating the process of devaluation of the dollar that has been ongoing since the Fed’s founding in 1913. Firmly in the grip of Keynesian thought, the Federal Reserve has established itself not just as the central bank of the United States, but as the central economic planner. The Fed now finds itself with a balance sheet of over four trillion dollars, equal to about one quarter of the United States’ annual gross domestic product. The Fed’s monopoly over the system of money and banking in this country has enabled it to achieve this outsized and unchecked power. And yet how many Americans are even aware that all of this has taken place?
That is the reason behind the founding of the Carl Menger Center for the Study of Money and Banking. It is the purpose of the Carl Menger Center to ensure that far more than one man in a million are aware of the importance of sound money and the dangers of monetary debasement. The development of money is what enabled civilization. Money replaces barter, eliminates the need for a double coincidence of wants, and greatly expands the ability of people to trade with one another. Debasement of the monetary unit does just the opposite, destroying the incentive to save, encouraging indebtedness and profligacy, and tearing apart both the physical and moral structure of society.
Debasement of currency affects everyone in the United States. A person retiring today at age 55 might very well live for another 30 years. Even if the Federal Reserve were able to manage price inflation at its two percent long-term target, that would mean that an average retiree would see the purchasing power of his savings cut nearly in half by the time he reaches his mid-80s. A college graduate entering the workforce today and saving money in a bank account will see the value of those savings cut in half by the time he retires. And all this is assuming that the Fed can keep a lid on inflation, which history has shown us is a dubious proposition. The actual effects of the Federal Reserve’s monetary policy are likely to be far, far worse.
The Carl Menger Center views itself as an outgrowth of Ron Paul’s hard work to educate the American people about the dangers of the Federal Reserve’s loose monetary policy. The Menger Center’s aim is to educate the American people through our website and through our future programs about the importance of sound money and sound banking. There is still a great lack of knowledge about the problems with the Federal Reserve, considerable misunderstanding or ignorance of Dr. Paul’s views, and much work to be done in educating the general public. It was a great privilege for me to work for Dr. Paul and assist him in his role of educating the American people when he was in Congress, and I look forward to continuing to educate on monetary matters through my work with the Carl Menger Center.