People generally assume that government is careful about preserving the value of the dollar. As we’ve seen, that is far from the case. When Franklin Roosevelt became president, he raised the dollar price of gold -- from bed.
In his diary, FDR’s Treasury Secretary Henry Morgenthau Jr. wrote, “If anybody ever knew how we really set the gold price ... they would be frightened.” One day, Roosevelt was asked how he picked the change in the price of gold, and he said he increased it 21 cents because 7 was a lucky number (3 times 7).
When government monetary policy is too loose, you get hyperinflation, like in Germany in the 1920s. A more recent example is Zimbabwe, where prices rose so fast that the government printed bills with a face value of 100 trillion (Zimbabwean) dollars.
“That has never happened in the case of private competing currencies,” said Barker, who wants to abolish the Fed. “In all of those instances in world history where we’ve had (competition), we have not had rampant runaway inflation.”
Barker said the information age may break down the government’s monopoly on money.
“There are experiments going on. There’s something called Bitcoin (bitcoin.org), which is an electronic money that some people are experimenting with. The legal status is a bit unclear.”
I pointed out the irony of a former Fed economist wanting to close the Fed.
“The Federal Reserve is not the first agency of government that I would get rid of,” he said. “But one thing we’ve learned over the last several decades is that central planning does not work as well as markets.”