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The Fed debases money, society

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Saturday, Nov. 3, 2012, 9:03 p.m.

To be effective, money must possess the essential quality of trust.

For commerce to thrive, trading partners must trust each other. When trust is broken, economies decline, dragging down entire societies. The replacements are social disorder, violence — based often on victimization — and a form of dictatorial government.

Increasingly, observers and politicians warn of economic chaos and civil unrest. Virtually none dare even to hint at the detail, the horrors of social disorder or to make any serious attempt to identify the source of economic collapse. Too often, blame is heaped on mere participants, like bankers.

In most human endeavors, good or bad, the key to direction lies at the top. The United States has an irresponsibly spendthrift Congress and an accommodative central bank — the Federal Reserve. Dissident movements, like Occupy Wall Street, are strangely silent on attaching blame to Congress or the Fed.

Modern societies are based on advanced economies. These economies are dependent critically on money that is trusted. Business partners must trust currency they receive for their goods and services will retain its value.

Money must possess distinct qualities such as being readily identifiable, exchangeable and easily transportable. But trust is its preeminent quality. It can be argued that sound money is crucial to a vibrant economy and a stable society.

Recognizing this, Russian Communist leader Vladimir Lenin said, “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.”

Opinion polls indicate that most Americans appear to recognize the irresponsible nature of Congressional spending and resulting debt. Though despised by some, the Fed receives far less popular criticism. This is less surprising when it is realized how cleverly the Fed covers its tracks.

In 2008, the Fed enabled increased credit of $16 trillion. Combined with a program called Quantitative Easing — making available extra money to stimulate the economy — it actually represents aggressive currency debasement.

Hinted at by the rising prices of food, energy and gold, the dollar's true fall is hidden. Most would expect a debased dollar to fall in value when measured against the currency of a sound money country like Switzerland, for instance, exposing dollar debasement for all to see.

Increased Fed injections of cash are having little expected positive economic effect. Once a majority realizes how ruthlessly they are being cheated by Fed debasement and refuse to accept “untrusted” dollars, social trust will erode. Commerce will stall, creating social unrest so serious that scapegoats likely will be sought.

Suffering untrusted currency and economic collapse, the Romans blamed the Christians, the French blamed their nobility, and Russia and Weimar Germany blamed Jews.

Would so-called “speculators” or capitalists be blamed in a modern America?

John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Email him at

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