There are two types of currency – fiat and commodity. Commodity currency is money that derives its value because it is backed by, well, (you guessed it) a commodity – traditionally this has been gold or silver. The U.S. used silver, then gold, to back our money – at least in part, up until 1976.
Since then, our dollar has officially been fiat currency. To put it as plainly as possible, the U.S. Dollar is worth something now because the Feds print “This note is legal tender for all debts, public and private” on the front of the dollar. That’s it. I kid you not.
Now obviously, it’s a bit more complex than that – after all, we have a Treasury Department and a Federal Reserve somehow keeping all these dollars worth something. In fact, there’s a good deal of monkeying around with things like how much money is being printed and changing loan rates. This is all done to keep our dollars healthy both at home and in global markets.
But what exactly are the Feds doing and is it working? That’s become a very important question since the recession wreaked havoc on our economy and lives. And that, in a nutshell, is what the Audit the Fed bill was drafted to find out. The sponsor of the bill, Rep. Paul Broun, has said rather simply:
“The expansion in money supply under the Federal Reserve has led to an unstable environment of booms and busts that have wrecked the financial security and stability of average Americans…This hurts poor people and senior citizens and the middle class the absolute most.” (The Blaze)
On the Senate side, Rand Paul has introduced a similar bill backed by 30 lawmakers. However, that is expected to not even be considered by the Senate before it adjourns – much like what is the likely fate of the House bill.
The problem is a very simple one. The Federal Reserve Board has acted with a lot of autonomy and they’ve arguably been doing a bad job at it. Now the House, with this bill, wants to step in and review just what the heck is going on. Why has the dollar been declining? What is the plan to get us back on track? Are the Feds making it worse? Do we even have a plan?
For some reason a Democrat-controlled Senate doesn’t want that to happen. I’m not a conspiracy theorist, but seriously, what gives? Why in the world you wouldn’t want your bank audited when you start losing money is beyond me. In a sign of how exasperated the House has gotten, Broun said:
“I’d like to see us eliminate the Federal Reserve and go back to the gold standard, which will stabilize our economy.” (Newsmax)
That may seem a bit severe, but at least we’d know what a dollar is worth. More importantly, we’d know what it would be worth tomorrow. When Option B is a closed room meeting of a few Federal employees setting policy, refusing to explain it and working without oversight – that old commodity currency starts sounding appealing.
Written by Mark Davis
(Photo courtesy of thefixer, Flickr CC BY 2.0)
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