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Over the past few years, we have seen a renewed interest in the role of the Federal Reserve. Rep. Ron Paul’s (R-Texas) presidential runs, along with the financial meltdown have directed much needed attention to the central bank. The American people are finally waking up to the giant elephant in the room—the Fed—which bears significant responsibility for many of the financial crises over the past century.
Something big is happening. The Atlantic recently reported that “on college campuses, Obama’s not cool anymore.” Young people are instead flocking to the message of limited government, personal liberty and sound money. Ron Paul has been the loudest critic of the Fed in Washington for over thirty years. His multiple campus tours have been a resounding success. Many universities do not have auditoriums large enough to seat all the students wanting to hear Dr. Paul speak. Anyone who attended the 2011 Conservative Political Action Conference (CPAC), where Ron Paul won the presidential straw poll, can attest to his enthusiastic support, especially from young people.
Nearly everyone knows that the typical college campus is biased in favor of leftists. From personal experience, it is difficult being a liberty-minded student in a political science college course. That’s why it’s incredible that so many college students are rejecting the Keynesian policies espoused by their professors. Young Americans for Liberty (the continuation of Students for Ron Paul) now has a total of 222 chapters nationwide. These young people are educating themselves on ideas generally not taught in a college classroom. They’re instead picking up books by Ludwig von Mises, F.A. Hayek, Murray Rothbard and other Austrian economists.
These young Americans for liberty overwhelmingly support abolishing the Federal Reserve System. You can hear them chanting “end the Fed!” at rallies. Ron Paul dedicated his book End the Fed “to the young people… who are the heart of the anti-Fed movement.” Young people bring energy and enthusiasm to the message of sound money. It has suddenly become mainstream not just to criticize the Federal Reserve but to question its reason for existence.
The track record of the Federal Reserve has been a dismal failure. Defenders of the status quo might tell you that the Federal Reserve is necessary to maintain the stability of the financial system. The stated purpose of the Federal Reserve, taken by its own definition on its website, is to "conduct the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices." Not only did the Federal Reserve fail to prevent the Great Depression, the 1970s stagflation and the recent financial crisis, but it was the primary culprit behind these financial disasters. We would not experience such dramatic economic swings were it not for monetary policies that distort real prices and encourage improper investment decisions.
Fed supporters claim that our economy would be chaotic without the central bank manipulating our money supply. Think again. The United States has a long history without the Federal Reserve. From 1776 to 1912, the value of the dollar increased by 11 percent. During this time, we experienced a few financial panics, but they were far less severe and rare back then. Many Austrian economists place the blame for these crises on the policies of the First and Second Bank of the United States. It is hard to blame the free market because we’ve never had free market capitalism.
The U.S. economy has experienced far more ups and downs after the Federal Reserve came into existence in 1913. The value of the dollar has declined by roughly 95 percent in less than 100 years. The dollar buys 95 percent fewer goods in 2011 than it did in 1913. Inflation, the loss of value in the dollar, is created by the Federal Reserve manipulating the money supply behind closed doors.
It is inspiring that the youth in America are involved in exposing the truth about the Federal Reserve. We certainly face an uphill battle against powerful special interests. Yet, these dedicated young Americans show no signs of giving up. As Victor Hugo said, “no army can stop an idea whose time has come.”