Marriner S. Eccles Federal Reserve Board Building
Marriner S. Eccles Federal Reserve Board Building

The Federal Reserve’s First Century – OpEd


One factor often cited as contributing to the decline of the Roman Empire was the debasement of the currency. In a period of about 150 years following Emperor Nero’s reign (from 54 to 68 AD) the value of Rome’s currency fell by 50%. By 250 AD, 200 years after Nero, the value of Rome’s currency was only 5% of its value two centuries before.

The Federal Reserve Bank (Fed), founded in 1913 and now in its centennial year, controls the value of the US dollar. The currency debasement in the Roman Empire looks positively tame compared to what the Fed has done to the value of the dollar.

According to the official price level data compiled by the Bureau of Labor Statistics, the Consumer Price Index (CPI) in 1913 was 9.9, and in 2012 stood at 229.6. In the Fed’s first century the value of the dollar has fallen to 4.3% of its value in 1913.

From the nation’s founding until 1913 the price level was approximately constant, according to The Historical Statistics of the United States. The value of the dollar has plummeted since the Fed was given control over it.

The Romans undertook currency debasement the old way, by reducing the precious metal content of coins. The Fed has a much easier arrangement for currency debasement. It can just “print up” new money. Actually, it’s even easier than that. The Fed can create money just by a bookkeeping entry.

Under the Fed’s watch, currency debasement has been substantially greater than in the Roman Empire. Are we Rome? The Fed certainly appears to be pointing us in that direction.

Randall G. Holcombe

Randall G. Holcombe is Research Fellow at The Independent Institute, DeVoe Moore Professor of Economics at Florida State University, past President of the Public Choice Society, and past President of the Society for the Development of Austrian Economics. He received his Ph.D. in economics from Virginia Tech, and has taught at Texas A&M University and Auburn University. Dr. Holcombe is also Senior Fellow at the James Madison Institute and was a member of the Florida Governor’s Council of Economic Advisors.

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