With the Federal Reserve Act of 1913, the United States began to abandon the gold standard. The process was completed in 1971 when the Federal Reserve note, or dollar, became fiat currency- paper worth only what buyers and sellers perceive it to be worth at the time of exchange.
Fiat currency facilitates government spending and borrowing, particularly to finance wars and the reelection of politicians through corporate welfare and voter entitlements. Savers have not fared well under this system of hidden taxation. A dollar saved in 1913 is now worth a few pennies. Back then, it could buy twelve gallons of gas.
The Sequester has provided another opportunity for Keynesians to argue that money-printing and spending stimulates the economy and creates wealth. But if that is true, how did this country rapidly grow into one of the richest countries in the world before 1913 without constant and massive “stimulus?” About that they are silent.
If the government’s finances can be likened to those of a family, the Sequester is analogous to trimming $85 in yearly spending for a family over $16,000 dollars in debt. The new definition of austerity is not going out to eat one night a year.
Following the money-printing crowd’s ideas to their logical conclusion, and in honor of the Federal Reserve’s centennial, we should pass the Family Reserve Act of Pure Stimulus. By allowing families to print money on their home computers, we would be certain to create adequate demand in the economy.