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What happened to our money? If you think it's not worth what it used to be, you're right. And if you think you've been robbed by inflation created by the Fed, you're right again.(HISTORY: PAST AND PERSPECTIVE)(Viewpoint essay)
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The year 1968 should be remembered as the year when the term "Federal Reserve Note" became the exclusive heading on all U.S. paper currency. From the creation of the Fed in 1913 until that fateful year, Federal Reserve Notes (FRNs) circulated side by side with U.S. Treasury Notes. The Federal Reserve began issuing its own currency long before 1968, but it didn't gain exclusivity until 1968.
During several decades prior to 1968, FRNs were interchangeable with U.S. Treasury Gold Certificates and U.S. Treasury Silver Certificates. As a way to make them accepted, early FRNs actually stated "Redeemable in gold on demand," and gold could be obtained when exchanging them. The American people were thereby conditioned to accept either a U.S. Treasury Note or a Federal Reserve Note as if there were no differences. But only FRNs are in use today, and there is no tie whatsoever between FRNs and gold or any other precious medal. In fact, the Fed can print as much of this unbacked "fiat" currency as is needed to finance a long list of unconstitutional programs. This inflates the money supply, lowers the value of all dollars, and forces inevitable boosts in prices.
How this happened and what it has meant and continues to mean for Americans--and others who use U.S. currency--is outlined in what follows.
The Fed's Vast Power
A mere three days before Christmas 1913, Congress passed the Federal Reserve Act. With a sizeable number of its members already away from Washington for the holiday season, the House vote was 290 to 60, and the Senate approved the measure by 45 to 2. Woodrow Wilson, guided by his omnipresent adviser Edward Mandell House, signed the measure into law.
Among the act's opponents, Massachusetts Senator Henry Cabot Lodge, Sr. predicted, "The bill as it stands seems to me to open the way to a vast inflation of the currency.... I do not like to think that any law can be passed which will make it possible to submerge the gold standard in a flood of irredeemable paper currency." This shows that there was real understanding about what the Fed would do with its ill-gotten powers.
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