Robbed

The classic liberal era lasted a hundred years up until 1913 when progressives took over with the introduction of central banking. During the liberal era money was sound. This means that there was no debasement of the money. Prices did not rise, they fell.

The mechanism behind this can be illustrated with an example such as a fine coffee table. If someone has an extra coffee table, he can sell it and put the saving sin a bank account. During the liberal era, that money would earn interest above the rate of inflation. At some later time, the money can be withdrawn, a coffee table of equal quality can be bought back, and there will be some extra money to spare.

The reason this was possible was that the money in the bank was invested sensibly. Among people who borrowed money, there might have been a carpenter borrowing the amount equivalent to the coffee table. This money was used to buy tools and materials. He produced perhaps three fine coffee tables from the money borrowed. One table was then sold in order to pay for the loan and the interest to the bank. Another was sold so that he and his family had food and a place to live for a month or two, and the third may have been sold for money to save.

Not only did the original coffee table provide its original owner with some capital gains, it enriched the carpenter and the society at large. One coffee table was turned into four coffee tables.

Today, this is no longer how things work. Interest is below inflation. No coffee table of equal quality can be bought back later with money saved in the bank. The reason for this is that money put into a bank seldom goes to productive use. Central banks and fractional reserve banking encourages consumption and big government. It is not the carpenter that gets the money, its some well connected bureaucrat with access to cheep credit. This drives up the prices of everything. Once sold, a coffee table is forever lost. The same is the case for other things, such as houses. Very rarely can a person expect to buy back a house that he has sold.

What makes it even harder to buy back the coffee table or house that was sold is that the meager interest that is earned is taxed. The state does not only push up prices by redirecting resources from carpenters to bureaucrats, it imposes a penalty on savings as well, and it never hesitates to point out that this is to combat greed, as if the person who sold his coffee table is somehow greedy for wishing to buy back a similar table at some future point.

The rational way to act in such a system is to buy and never sell. It is better to keep the coffee table than to sell it. However, this is not an optimal way to organize ones affairs. Only the rich can do this. The middle class sell stuff every now and again, and they loose purchasing power every time. What used to make us richer now makes us poorer. The parasitic activities of government and banks siphon wealth away from the middle class and into the hands of self important busybodies, collectively known as the elite.

By U.S. Government - Extracted from PDF version of the Federal Reserve's Purposes & Functions document (direct PDF URL [1])., Public Domain, Link