“My fellow Americans, ask not what your country can do for you. Ask instead what your country has been doing to you and is likely to keep doing to you for as long as it can buy with fiat money the votes of a majority.”—Gary North, “History Revisionism – High Priests of Woodrow Wilson’s Covenant”
Gary North’s article focuses mostly on Woodrow Wilson’s influence on the inaugural addresses of Eisenhower and Kennedy and their meaning in the world of 2008. As he observed, we have had “one long war since 1917,” with Fed fiat money playing an indispensable supporting role.
Everything the government does costs money, and it produces nothing with which to acquire it. For 2025, it coerced a total of $5.4 trillion from taxpayers and dollar-holders but ended up spending $7 trillion, producing a “rolling” deficit of $1.7 trillion. The biggest fights have always been over whose ox gets gored to fund it. Almost no one wonders whether government as it stands should exist at all.
When Wilson decided to impose democracy on the world, he had the backing of two newly-created theft mechanisms that he signed into law in 1913: The income tax and the central bank. The first extracts wealth directly from those who own it; the second takes it surreptitiously, which, as Copernicus wrote in 1526,
…is noticed by only a few very thoughtful people, since it does not operate all at once and at a single blow, but gradually overthrows governments, and in a hidden, insidious way.
Knowingly or not, Keynes, in 1919, expressed a similar thought with his famous “one man in a million” declaration:
There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
Americans like to think of themselves as sharp, incapable of being hoodwinked. If they get scammed a second time they blame themselves for not seeing it—“Fool me twice, shame on me.” But most of them have missed the biggest scam of all: The Federal Reserve System.
Of the various reasons for missing it, the biggest one is the conviction that market economies are vulnerable to harmful forces that only the state and its central bank can avoid. Experts on the Great Depression such as former Fed Chair Ben Bernanke build their arguments on the grounds that markets sometimes violate the fundamental law of trade—production buys production (sometimes known as Say’s Law)—and need supervision and intervention to avoid this problem.
When the roof began to fall in August 1929, they were at a loss as to which intervention to pursue. They could’ve referred to the Depression of 1921 for guidance when the government watched as the Fed tightened then eased. As one economist explained, “During this period, there was nothing remotely like a fiscal stimulus package, a TARP program, or even a QE policy designed to prevent economic collapse.” Deflation—seen as the villain in the 1930s Depression—cured the earlier slump because prices had been inflated.
Most people who study economics at state-funded universities treat the Fed as a necessary institution, not a scam. Their acquired expertise will include the view that the Fed’s Federal Open Market Committee (FOMC) has undertaken the formidable task of determining interest rates that best promotes full employment and low inflation. The Fed has a superhuman challenge and if it sometimes fails to please everyone, who could do better?
But it goes deeper. According to a FAQ section posted by the Kansas City Fed, “The Fed has long viewed transparency as a fundamental principle of central banking that supports accountability.” If Fed operations are transparent, most people are blind. The Fed’s operations are largely a mystery to most people. And this is to its advantage.
How the Fed Conducts Its Mission
It is commonly said the Fed prints money when it targets a lower Federal Funds Rate. While this is true, it shrouds all the plumbing that makes it happen.
The Federal Funds Rate is “the interest commercial banks charge when they lend money to one another for extremely short-term periods—literally, overnight.” It influences other rates such as rates for mortgages, loans, credit cards, and savings.
The FOMC meets at least eight times a year to decide what to do about the current Federal Funds Rate. Their discussions are augmented by the Beige Book report of conditions in the 12 Reserve districts. Lowering the rate means the Fed will print more money (in its convoluted manner) to get the consumer price increases it wants. If it decides that prices are running too high, it will pull money out of the economy by selling some of its securities. This is how it attempts to lower or raise the Federal Funds Rate.
Influencing the Federal Funds Rate is “the interest the Fed pays on the funds that banks hold as reserve balances at their Federal Reserve Bank, which is the Interest on Reserves Balances (IORB) rate.” If banks make more keeping their reserves than lending them to other banks, the reason is likely a high IORB. Both the Federal Funds Rate and the IORB rate are considered important tools for manipulating market prices.
Actual market prices sometimes defy Fed intentions to raise them, as seen by the Moore’s Law effects on computer technology. Fortunately for consumers, innovation can outpace monetary debasement in specific sectors.
The Arsonist is Seen as a Firefighter
The Fed sets as a target a 2 percent inflation rate. It defines inflation as “the rate at which the price of goods and services increases over time.” In other words, its job is to increase prices. Price increases, not the Fed actions that increase them, are the measure of inflation. And while many judge the results by the Consumer Price Index (CPI), the Fed relies on the Personal Consumption Index (PCI), presumably because it covers more consumer spending than the CPI.
Please note, the Fed is not perceiving inflation and reacting to it. It is instead pursuing inflation as a goal, as stated in its mandate. Quoting Chairman Powell:
In conducting monetary policy, we will remain highly focused on fostering as strong a labor market as possible for the benefit of all Americans. And we will steadfastly seek to achieve a 2 percent inflation rate over time.
It is pursuing, in other words, a steady 2 percent depreciation in the purchasing power of the dollar. The Fed has been exceptional in this regard: Since my daughters were born in 1982, consumer prices have risen roughly 235 percent. Its policy bias pushes people to spend rather than save, even if it means they go into debt. Savers get punished, as do people living on fixed incomes. Since savings are the pool from which investment draws, entrepreneurs are punished too. Yet investment is the springboard of rising productivity and higher living standards. It sounds like a predatory computer game but it’s Fed policy.
Inflation provides the wealth transfer. The interest-rate juggling is how it’s accomplished.
Changing Definition
As discussed in On the Origin and Evolution of the Word “Inflation” by Michael F. Bryan, published by the Cleveland Fed, inflation once had an entirely different meaning:
What was once a word that described a monetary cause now describes a price outcome. This shift in meaning has complicated the position of anti-inflation advocates. As a condition of the money stock, an inflating currency has but one origin—the central bank—and one solution—a less expansive money growth rate. But as a condition of the price level, which may have originated from a variety of things (including a depreciating dollar, rising labor costs, bad weather, or a number of factors other than “too much money”), the solution to—and the prudence of— eliminating inflation is much less clear.
Confusion accelerated after the publication of Keynes’s General Theory in 1936:
In addition to separating the price level from the money stock, the Keynesian revolution in economics appears to have separated the word inflation from a condition of money and redefined it as a description of prices. In this way, inflation became synonymous with any price increase.
The Fed thus escapes the public’s scrutiny when prices rise.
Conclusion
If the modern global fiat regime began in 1971 with the Nixon Shock and the stagflation of the 1970s, it deserves applause: it was not an instant disaster. Fiat money is a politician’s best friend because it creates an invisible tax through the institutionalized depreciation of currency. We shouldn’t expect them to part with it—especially as their perpetual interest in war demands ever greater funding.
