On Dec. 23, 1913, Congress passed the Federal Reserve Act, which created a central banking system in the United States, of which all nationally chartered banks were forced to become members. (State banks had a choice, but nonmember banks had to keep deposit accounts with member banks, and so were under control of the Federal Reserve as well.) The Federal Reserve Note, the current legal tender, was also created at this time. It has now been a full century since this institution was created, so let us reflect upon its various (mis)deeds. This a timeline of some of the major events involving the Federal Reserve over the past century:
1913: The Federal Reserve is created.
1914: Benjamin Strong becomes the first Governor of the Federal Reserve Bank of New York, which was the most powerful position in the Federal Reserve until the Banking Acts of 1933 and 1935. Charles S. Hamlin becomes the first Chairman of the Federal Reserve.
1918: World War I drives prices higher. Prices have increased over 50 percent since 1913.
c. 1919: The money supply has doubled since 1913. This is an inflation rate of 100 percent in a six-year period by the correct definition of inflation.
1920: Prices have doubled since 1913. This is an inflation rate of 100 percent in a seven-year period by the commonly used (but incorrect) definition of inflation. This, along with the realignment to a peacetime economy following World War I, helps to cause the Depression of 1920-21.
1921: Following the Depression of 1920-21, the Fed continues inflationary policies to pay off war debts and help the Bank of England maintain a phony gold standard. This consequences of this were partly to blame for the Great Depression.
1922: Prices fall, but have still increased 70 percent since 1913. Prices remain near this level for the rest of the decade. Daniel Crissinger becomes Chairman of the Federal Reserve.
1927: Roy A. Young becomes Chairman of the Federal Reserve.
1928: Benjamin Strong dies in office. George L. Harrison becomes President of the Federal Reserve Bank of New York.
c. 1929: The money supply has tripled since 1913.
1930: Eugene Meyer becomes Chairman of the Federal Reserve.
1930-33: Prices fall again, and continue falling until reaching a low of 31 percent above 1913 levels in 1933. Prices remain near this level for the rest of the decade.
1933: Eugene R. Black becomes Chairman of the Federal Reserve. President Franklin Roosevelt orders that gold owned by American citizens be confiscated and replaced with Federal Reserve Notes.
1933-35: The Banking Acts create the Federal Deposit Insurance Commission, insuring individual deposits and thereby creating a moral hazard for banks, which no longer needed to be as careful with their assets.
1934: Marriner S. Eccles becomes Chairman of the Federal Reserve.
1938: The Federal Reserve panics at the potential for inflation, and doubles the minimum reserve requirements. This sends the economy into a tailspin of credit liquidation.
c. 1941: The money supply has quadrupled since 1913.
1941-45: World War II drives prices higher, from 41.4 percent above 1913 levels in 1941 to 81.8 percent above 1913 levels in 1945.
c. 1943: The money supply has quintupled since 1913.
1947: Prices are again more than double those of 1913.
1948: Thomas B. McCabe becomes Chairman of the Federal Reserve.
1951: William McChesney Martin becomes Chairman of the Federal Reserve.
c. 1952: The money supply has increased ten-fold since 1913.
1960: The money supply has increased twenty-fold since 1913.
1961: Prices have tripled since 1913.
1966: The money supply has increased thirty-fold since 1913.
1970: Arthur F. Burns becomes Chairman of the Federal Reserve. The money supply has increased forty-fold since 1913.
1971: Prices have quadrupled since 1913. President Nixon ends the Bretton Woods system, closing the gold window. From this point onward, the Federal Reserve is able to create currency at a much greater pace, leading to much faster inflation and price increases.
1972: The money supply has increased fifty-fold since 1913.
1975: Prices have quintupled since 1913.
1978: G. William Miller becomes Chairman of the Federal Reserve.
1979: Paul Volcker becomes Chairman of the Federal Reserve.
1980: The Depository Institutions Deregulation and Monetary Control Act gives the Federal Reserve more control over non-member banks. The money supply has increased one hundred-fold since 1913.
1983: Prices have increased ten-fold since 1913.
1987: Alan Greenspan becomes Chairman of the Federal Reserve.
1990: The money supply has increased two hundred-fold since 1913.
1995: Prices have increased fifteen-fold since 1913.
2000: The money supply has increased three hundred-fold since 1913.
2004: The Federal Reserve lowers its interest rate target, leading to malinvestments in housing that create a bubble. The money supply has increased four hundred-fold since 1913.
2006: Ben Bernanke becomes Chairman of the Federal Reserve. Prices have increased twenty-fold since 1913. The housing bubble peaks.
2008: The money supply has increased five hundred-fold since 1913. The housing bubble bursts. The Federal Reserve begins quantitative easing in an attempt to mitigate the financial crisis of 2007-08.
2009-2011: Bloomberg L.P. sues the Board of Governors of the Federal Reserve System for disclosure of information about banks and other financial institutions that had borrowed from the Federal Reserve discount window during the United States housing bubble and ensuing financial crisis. The Fed was forced to release the information, which showed that the Fed had made as much as $1.2 trillion available to banks and other companies in the form of emergency loans between 2007 and 2010.
2013: Over the past century, the US dollar has lost 95.6 percent of its purchasing power. On average, an item that cost $100 in 1913 costs $2,354.23 at present. Also, while there were approximately $16 billion in circulation in 1913, this has expanded to $10.9718 trillion, an increase of over 68,000 percent.