I returned early this year from a productive trip to San Diego for the American Economic Association (AEA) meetings, where I met with several top economists, including Nobel Prize winners. One of the most popular sessions was a panel on the 100th anniversary of the Federal Reserve. The most shocking graph was presented by Ken Rogoff, a Harvard economist.
As the graph indicates, there was virtually no inflation prior to 1913, when the Federal Reserve was created (other than wars, which caused temporary inflation) and we went off the classical gold standard. Rogoff noted that since the Fed was created, prices have skyrocketed 30-fold, or 3,000%! This data confirms Murray Rothbard’s contention that the Fed was created to remove the barriers to inflation, not to control it.
Despite the fact that the Fed engineered all of this inflation, caused the Great Depression and failed to regulate the mortgage banks prior to the 2008 crisis, all of the panelists gave high marks to the Fed! (You can bet that won’t be the case at our special panel on the 100th anniversary of the Fed at FreedomFest!)
Another telling sign was the fact that the sessions with super Keynesian Paul Krugman were standing room only, while monetarists including Nobel laureate Bob Lucas had a small turnout.
What does this situation bode for the future? If Krugman has his way, it means greater deficits, more inflation, and higher taxes.