by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The Federal Reserve System recently turned 100, but it has presided over a century of folly, argues Professor Richard Timberlake in his magisterial 2013 book Constitutional Money (Cambridge University Press). Timberlake, professor emeritus at the University of Georgia, makes a compelling case that the U.S. made a terrible blunder in abandoning the gold standard in favor of a fiat monetary system under the control of a few supposed experts.
While the proponents of the Fed were certain that America needed a modern, “scientific” system to control money and credit, what we have learned is that the rule of experts, no matter how brilliant their credentials, is far inferior to the stability of a self-regulating market. We have replaced the rule of law – both constitutional and economic – with the rule of men; that is just as damaging with regard to money as with any other aspect of life. …
… The magnitude of the damage the Fed and statist politicians did can be seen in Timberlake’s comparison of the money supply that would have existed had the gold standard not been destroyed and what it actually was under the Fed. He calculates that in 1940, the money supply was “hardly more than one-third of what would have occurred with a true gold standard in place.”
In short, the most disastrous economic period in American history would have been avoided if we had not abandoned our constitutional money system in favor of “government sovereignty.”