The Creation of an American Caste System by the Federal Reserve
In 1913, Woodrow Wilson and his progressive allies made a promise to the American people – the Federal Reserve would protect them from economic downturns, prevent inflation, and ensure that the wealthy couldn’t dominate the financial markets at the expense of the less fortunate. However, over a century later, it has become clear that these promises were nothing more than empty words. The Federal Reserve has not only failed to fulfill its intended purpose but has also contributed to the creation of a permanent underclass in America.
The primary mechanism through which the Federal Reserve has transferred wealth from the American people to the government is inflation. The constant devaluation of currency through inflation has prevented countless American families from being able to save and improve their financial situation. As their savings constantly lose value, they find it increasingly difficult to get ahead and secure a stable future for themselves and their families.
For the past two decades, the Federal Reserve has artificially kept interest rates low to facilitate massive government spending. However, in 2020, when government spending reached unprecedented levels, the Fed took even more drastic measures. It created trillions of dollars out of thin air, further devaluing the currency and initiating an unparalleled transfer of wealth.
This transfer of wealth has not only affected individuals’ ability to save but has also driven a wedge between different groups of Americans. The painful inflation of the past three years has led to a significant increase in prices across the economy. This distortion of price signals has had severe consequences, particularly in the housing market.
The cost of owning a median-priced home has doubled since January 2021, even though it remains the same house. This phenomenon can be attributed to the monetization of housing, where a dwelling becomes a better store of value than the currency itself, despite its real value not improving. Consequently, even though Americans’ earnings have increased substantially in the past three years, they are unable to purchase the same amount of goods and services as before. The dream of homeownership, once an attainable goal for many, has become increasingly out of reach for the average American family.
In fact, a family earning the median household income can only afford a median-priced home in a handful of major metropolitan areas in the entire country. In many cities, the cost of owning such a home exceeds the take-home pay from the median household income. This dire situation highlights the fact that even individuals with seemingly high incomes cannot afford a typical house.
Furthermore, rising prices and inflation have made it increasingly difficult for people to save enough for a down payment on a home. By the time they reach their savings goals, home prices have risen again, forcing them back into a cycle of saving for an even larger down payment. Simultaneously, inflation erodes the real value of their savings while they sit in a bank account.
The consequences of this situation are evident – a growing number of Americans are becoming perpetual renters. An entire generation of young people has given up on the prospect of achieving the same standard of living as their parents. This artificial divide between those who own capital, such as housing, and those who can only borrow assets through renting, has created a stark disparity in wealth and opportunities.
Additionally, those struggling with skyrocketing rents are often forced to accumulate significant debt just to keep a roof over their heads. On the other hand, those who managed to secure a mortgage with a fixed interest rate before the surge in home prices and interest rates have shielded themselves from one of the primary drivers behind the cost-of-living increases in recent years. This disparity puts those who bought homes years ago at a considerable advantage over those trying to do so today.
The Federal Reserve’s monetary manipulations have not only financed trillions of dollars in federal budget deficits but have also effectively created a permanent underclass in America. This outcome stands in direct contradiction to the vision the country’s Founders had for a society characterized by upward mobility.
Class mobility is at the core of the American dream, but the Federal Reserve has turned it into a nightmare for many. The policies implemented by the central bank have had far-reaching and detrimental effects on the economic well-being of countless Americans. The promise of an equitable financial system, free from the control of the wealthy, has been shattered. The creation of an American caste system by the Federal Reserve is a reality that must be acknowledged and addressed if we are to restore economic opportunity and fairness for all.
Note: This article was originally published by The Washington Times and reprinted with permission from The Daily Signal, a publication of The Heritage Foundation. The views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
