A senior Federal Reserve economist has come out and attacked Ron Paul as a 'pinhead' in his view of the Federal Reserve, and its devaluation of the dollar.
David Andolfatto, Vice President in the Research Division of the Federal Reserve Bank of St. Louis, spoke out against Ron Paul and on his popular book, End the Fed, by attempting to spin an undefendable position that the Fed has been instrumental in destroying the dollar. In an article Friday from the Economic Policy Journal blog, Andolfatto uses a theory called 'money neutrality' to defend the Fed's position over Paul's simple, yet honest explanation of monetary inflation that has been created by the Fed.
There is this old idea in monetary theory called money neutrality. Money neutrality means that larger quantities of money ultimately manifest themselves in the form of higher nominal prices (and wages), and not on real quantities. No serious economist disputes the idea of long-run money neutrality.
Yes, what cost $1 in 1913 now costs $20. But so what? Money neutrality states that if you were earning $1 per hour in 1913, you are now earning $20 per hour (and even more, if labor productivity is higher).
As you can see, Fed Senior economist Andolfatto attempts to say that as prices have increased, so have wages, which is a false and incorrect statement in the reality of our economy. The dollar since 1913 has lost 97% of its purchasing value, but wages have not even come close to rising that same percentage for workers. In 1960, the average yearly income for households was $5199, and in 2010, the same yearly income was $53,100. Thats a difference of a 10.21 times wage increase versus a decline of 20 times for the dollar.
Sadly, Andolfatto adds no more to his analysis or defense of the Federal Reserve. He does not address the fact that the Fed has destroyed the value of our currency since its inception, but instead attempts to defend a strawman argument over prices and wages instead of the currency itself.
This is because Ron Paul is right, and the Fed has no defense. The Federal Reserve's feeble attack on Ron Paul, and its attempts to refute Paul's book, End the Fed, show the absolute ignorance, or perhaps diabolical agenda, of the men who run the Federal Reserve, and their historical actions in destroying America through its fiat currency.
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