Modified On April 20, 2009
The Weekly Standard has a piece explaining why Fed Chairman Ben Bernanke needs to spell out how he plans to head off hyperinflation by Andy Kessler. It’s a pretty concise explanation of money supply, inflation, deflation, etc. And, mixed in with the history, the economics and the references to fractional reserve banking is this:
But banking did increase the money supply beyond the amount of gold that could be extracted. In fact, since Adam and Eve, 160,000 tons of gold have been panned and mined from Mother Earth. At $35 per ounce under the gold standard, that came to $180 billion in value, not nearly enough to support all the value created by entrepreneurs; heck, Google is worth almost that much.
In the long run, the economy grew faster than population, ushering in railroads and interstate highways and even Carrot Top performing at the Luxor in Las Vegas. Now that’s wealth. So something eventually went right. One something was the Federal Reserve, created in 1913 to control how much money is in circulation. The Fed would create a monetary base, originally backed by the gold in Fort Knox, that private banks would then lend against.
Carrot Top is officially a cultural icon. His headlining in the Luxor, along with extensive railroads and well-maintained highways, is a sign of remarkable (perhaps excessive?)
American wealth!