I had no idea what money was in 2005. I was now making some, but mostly paying it out to financial institutions that helped me acquire a pretty expensive bachelor’s degree. I had worked for it, used it, saved it, even invested some in my then 23 years of experience, but never, had I really understood it. I was a few credit’s shy of an econ minor from that costly degree, but never really learned a thing about it. Macro classes discussed monetary policy with some vague lessons about interest rate manipulation and reserves, but not much else. We were told the mystical Federal Reserve was important, controlled the business cycles, and kept us all optimally employed but never really how or why. It was as if the creation of the Federal Reserve was like the discovery of the polio vaccine. The historical slant that the Fed enjoys is that it was a response to the flawed nature of the less sophisticated gold standard. The end of the gold standard is falsely accredited in academics as economic progress. Man’s innovation in the science of economics to fix what was broken in nature.
Central bank proponents will not discuss the reality of a gold standard. When you approach the subject, they find you barbaric. Many people who I consider relatively intellectual will not take the discussion any further than condescendingly denying a rational discussion. The intellectual guidelines of the last 8 or 9 decades has defended and promoted central bank supremacy over the supply of money. Most who follow it, however, cannot tell you why. The institutional faith placed in the Federal Reserve permeates all commonly educated people. If you attended high school or graduate school, you likely have a blind faith in the only system you’ve ever known. Some argue the fact that since academia has long adopted central banking as the superior money manager there must be some truth to it. I have never heard any proof. Most people holding onto their central bank beliefs will counter the gold standard with generic statements like, “It’s (central banks) absolutely essential in a MODERN economy.” This is not a persuasive argument. What about it being “modern” makes controlling elites and their paper a better option than gold?
There are some attempts at logical arguments defending the Fed’s monopoly over the money supply, but they too require a leap of faith in a monopolized banking scheme of power elite interests. Some are based on false assumptions that gold prices are too variable and unstable, but these are through fiat money’s relationship with commodities. Others use deflation as the evil scourge that awaits a return to the gold constrained monetary system, but price deflation can signal more productive output and a strengthening currency.
Check out Gary North’s article Blind Men’s Bluff on the central bank defenders and the history of why they might be so. Its a little lengthy but well worth the read. He discusses the banking interests’ high- jacking of academia and the fallacy behind common pro central bank arguments.