On Monday, Treasury Secretary Scott Bessent called for a full review of the Federal Reserve system. He said on CNBC’s Squawk Box, “I think what we need to do is examine the entire Federal Reserve institution and whether they have been successful.”
It’s a completely legitimate statement, but Bessent is a bizarre messenger for it.
To be sure, the Treasury Secretary is no Ron Paul. The Trump administration calling for a review of the Federal Reserve is more likely to result in findings that the Fed’s power should be transferred to an official government department so that he can play god with the monetary levers.
That said, Secretary Bessent made an interesting comment that harkens back to a day of simpler monetary policy. He quipped, “All these PhDs over there, I don’t know what they do. This is like universal basic income for academic economists.”
Is Secretary Bessent right? Centrally planned monetary policy today is astoundingly complex, supposedly requiring a team of hundreds of professional economists to manage.
Alternatively, under a gold standard, money is tied to a consistent, trusted asset.
Was the old way better? Does money need “interesting features” or esoteric, in-depth explanations from experts using jargon that alienates the average person?
Historically, the answer has been no.
Elite bankers and politicians hatched the Federal Reserve System during secret meetings in a smoky room on Jekyll Island, Georgia, with the bill ultimately passing in late December 1913.
According to their website, “The Federal Reserve Board employs more than 500 researchers, including more than 400 Ph.D. economists, who represent an exceptionally diverse range of interested and specific areas of expertise.”
These researchers attempt to operate an incredibly convoluted monetary system by adjusting interest rates, engaging in market interventions such as bond purchases, and issuing forward guidance. In a nutshell, the Fed fixes the price of money.
Does a monetary system have to be so complex? And further still, does all this combined brainpower from “top institutions” actually deliver better results than a simpler solution?
Monetary policy today involves the impossible job of balancing inflation forecasts, unemployment rates, tenuous geopolitical circumstances, trade and currency wars, and more.
Meanwhile, the average person has little knowledge or interest in regressions, dot plots, or yield curve control.
With systems so complex, one would think a world before modern monetary theory (not to be mistaken with Modern Monetary Theory) would have been utter chaos. But history shows that was not the case. The chaos under the current system may be greater.
Given the lack of value being added, it’s not unreasonable to suggest the Federal Reserve is a glorified jobs program for academics and economists.
Many goods throughout history, with varying degrees of effectiveness, have served as media of exchange: salt, wampum, and tobacco have all been used as money, just to name a few. However, gold and silver emerged as universally accepted monies by the free market because of their durability, transportability, fungibility, and scarcity.
Emerged is the key. The process through which money is “created” is not one of central planning or of creation at all, but rather one in which money is “discovered” by markets.
In the United States, monetary policy before the Federal Reserve was simply the classical gold standard. Between 1880-1914, the United States enjoyed an inflation rate of only 0.1 percent per year. This period saw real economic growth, increases in living standards, and bona fide innovation. A predictable money supply allows individuals, families, and entrepreneurs to make plans and investments for the future.
Gold’s role in restraining government spending also prevents unmitigated growth of the state. By not diluting America’s money with wars or expensive and inefficient entitlement programs, currency holders were not subjected to the harsh effects of inflation.
This “boring” system, based on honest weights and measures, protected individuals, restrained government, and created an environment that promoted principles of accountability and freedom. This system wasn’t centrally planned, masked in technical language, or gatekept by “experts” – it was chosen by millions of market actors acting in their own best interest. This is why sound money matters.
On the other hand, since the establishment of the Federal Reserve, holders of America’s paper money have been pillaged by central bankers. Since 1913, the Federal Reserve note –commonly referred to incorrectly as the U.S. Dollar – has lost more than 96% of its value.
The expertise of these central bankers brought us episodes like 1970s stagflation, with inflation peaking at nearly 14%, and the 2008 Great Recession, caused by massive bubbles across various sectors of the economy, all fueled by Federal Reserve manipulation of interest rates. Also, consider the waves of inflation following the Federal Reserve’s response to COVID-19, after dismissing critics and assuring the nation that inflation was “transitory.”
The Federal Reserve seems to be an institution whose meddling creates more volatility and damage to everyday Americans. Hundreds of economists in the echo chambers of the Eccles Building (now in the midst of its billion-dollar taxpayer-funded renovation) and other Federal Reserve banks enable political manipulation and unrestrained government expansion at the expense of taxpayers and currency holders everywhere in the form of persistent debasement.
The gold standard underpinned periods of unbridled growth, stability, and honesty without technocratic control. Secretary Bessent is correct about the Federal Reserve’s flaws, but a system that further centralizes monetary control is not positive for sound money or freedom at large.
A return to sound money is the way forward. 2025 has featured incredible strides at the state level, with more than 32 states considering pro gold and silver bills, and more than a dozen enacted into law across the country. The Sound Money Defense League and Money Metals Exchange have led this charge for more than a decade.
When comparing a sound money standard to a central bank-managed unbacked paper money, the choice is clear.
400 Ph.D. economists vs. one shiny rock? My money is on the rock.
Img credit: Wikicommons
Jp Cortez is the Executive Director for the Sound Money Defense League, a non-partisan, national public policy group working to restore sound money at the state and federal level, and lead author of the Sound Money Index.
