The Federal Reserve poured $17.25 billion into the market today, following a month in which it released more than $100 billion. The moves, supposedly, will help lenders imbroiled in the crisis enveloping their industry. Like most things the Fed does, I have no idea what its effect will be. I don't second-guess the Fed's complicated individual moves because understanding them is beyond my limited scope of economics knowledge. The Fed itself is another matter. It's fairly simple.

In 1790, $1 was worth, well, $1. By 1912, $1 had balloned to $1.06. That's right, from the First Congress until the Sixty-Second Congress the dollar had inflated just six percent. That $1 from 1913 is now worth about $21.50. Or, viewed from the current perspective, today's dollar is worth about a 1913 nickel.

What happened in the republic's first century-and-a-quarter or so that did not happen in the ninety-five years since? Congress abdicated its Constitutionally-mandated responsibility of coining money. In 1914, the Federal Reserve took over. The result has been a manipulated, fraudulent dollar.

For anyone interested, an excellent website called MeasuringWorth.com, run by economists Lawrence Officer of the University of Illinois-Chicago and Samuel Williamson of Miami University (emeritus), calculates the value of the dollar over time. Inflation is slow and barely noticable. It's like that boiled frog analogy, where it's best to make the pot feel initially like a hot tub, with the temperature gradually increasing. The frog, then, won't leap out. Before the frog knows it, he's cooked--literally. It's the same with inflation. It doesn't knock you over the head and steal your money. It works methodically, subtly. Then you wake up and ask yourself why a pack of chewing gum costs a $1.16, why you can't rent a room for $300 a month anymore, or why it costs $10 to go to the movies.

Inflation is another way of saying an unstable, dishonest currency. Whether dubbed greenbackers, bimetallists, progressives, or New Dealers, whether in the 1860s, or 1890s, or 1930s, whether through the mouth of Edward Kellog or William Jennings Bryan, currency depreciation has been a longstanding leftist goal. The Left initially failed in making the dollar in your pocket today worth less than the dollar in your pocket yesterday. But it persevered, and persevered. It's success on this front is so total that even many of those who call themselves "conservative" view criticism of the Fed--I speak of criticism of the institution's existence and not mere criticism of the institution's decisions--as something akin to talk of the grassy knoll, Big Foot, and Martians.

But conservatism isn't about conserving the successes of liberalism, or progressivism, or populism--or at least it shouldn't be. Conserving, or even restoring, the basic outline of government bequeathed by the Founding Fathers should trump attempts to retain the liberal status quo. The Founding Fathers, as evidenced by the Constitution, directed that Congress--an institution certainly more accountable to the people and the states than the Federal Reserve--should coin money. Article 1, Section 8 grants Congress's powers, including "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures." At the very moment when Congress bailed, the relatively static value of money started becoming quite flexible.

Had private merchants fiddled with weights and measures half as much as the Fed has meddled with the dollar they would be in jail. A pound is a pound, a foot is a foot, but a dollar is...whatever the Federal Reserve says it is.

"currency depreciation has been a longstanding leftist goal"

Why is it a leftist goal?

The fed is responsible for the business cycle and boom bust capitalism: http://en.wikipedia.org/wiki/Austrian_theory_of_the_business_cycle

All in all, we'd better off with free banking or, failing that, a return to the gold standard.

I think that somewhere along the line, members of Congress went from being shrewd businessmen with their own hard knowledge of economics to career politicians whose knowlegde became limited to how to get reelected.

Creating the Federal Reserve and letting it handle the very complicated and mundane tasks of managing the economy through the valuation of currency was easy. And like a lot of guys who let their wives handle the checkbook, it's better for Congress to act concerned but ultimately let that mysterious entity known as the 'Fed' do the heavy lifting.

That's what I'm tryin' to tell ya'll. We been disenfranchisemented.

Good question, Ralph. I think early on, during the populist era and even before, with so many poor people or farmers in debt to banks, the impulse was to inflate the currency so that the debt became less onerous. Later, during the progressive era, the appeal was more to putting the power of the value of the dollar into the hands of experts, managers, technocrats, and other ubermen of the progressive narrative. During the New Deal, there was this idea that prosperity would come through inflation and so Roosevelt tried a million ways to inflate the currency (including taking the country off the Gold Standard), all to no avail.

Very well stated post Dan. Here is a nice clip of Ron Paul on the danger posed by Fed manipulation of the dollar:

http://www.youtube.com/watch?v=A4kxTkhwR_Q&mode=related&search=

He references the instability or at least weakness in the face of imprudent manipulation of a paper currency, and man he isn't kidding about historical precedent. The Treaty of Versailles forced Germany off the gold standard and in turn they entered a sickening hyper-inflation which is very likely the most important fact of life in the twenties in germany explaining the rise of political extremism.