At the 2012 Colorado Republican Party State Assembly, chants of “END THE FED! END THE FED!” broke out during a speech supporting presidential candidate Dr. Ron Paul. My fellow Paul delegates and I believed that by bringing attention to the Federal Reserve we could warn others about the upcoming inflation and recession. Republican candidates in Colorado are trying to use the 9.1% inflation and predictions of a recession to attack the Democrat Party. While they claim to oppose inflation, they forget the Paul presidential campaigns of 2008 and 2012. Therefore, they are presenting a confusing message to voters that reveals a good instinct toward reducing government spending but a lack of knowledge about economics. Whether you are a politician, a retired person living on a fixed income or a millennial like myself, you will benefit from understanding what causes inflation and what to do about it.

The book title by Thomas Mullen, “It’s the Fed, Stupid,” summarizes the entire reason we have the inflation we do today. But clarifying the language around “inflation” will help us understand better how the Federal Reserve impacts our lives. Today the term inflation that we see in the news and the way it is used by politicians refers to price inflation — i.e. an increase in the price of chicken at the grocery store or gas at the pump. Originally inflation was used by most economists before the 1980s to mean an increase in the supply of money. I will use this definition going forward. The Federal Reserve has grown the money supply in the United States by record numbers. As the former economist for the Colorado Division of Housing, Ryan McMaken points out; “(Between) April 2020 and April 2021, money supply growth in the United States often climbed above 35%, well above even the ‘high’ levels experienced from 2009 to 2013.”

President Donald Trump signed giant spending bills in 2020 designed to pacify unemployed citizens and businesses hurting from the government-imposed lockdowns. These spending bills were paid for with debt and as a result the Federal Reserve inflated the supply of money that was available in the economy.

This isn’t about Republicans or Democrats either.

Candidate Trump claimed he would pay down the $19 trillion national debt through eight years but after four had signed enough spending bills to leave our nation with $28 trillion in federal debt. It was certainly bad for government to send stimulus checks to people who still had jobs and Paycheck Protection Program (PPP) loans to everyone, including Hunter Biden’s favorite prostitute, but the Federal Reserve is what allowed the government to get away with their poor fiscal choices.

What is the Federal Reserve? It is the central banking system that we have had in the United States since 1913 and is often referred to as the “Fed.” For the U.S. Government to increase its debt the Department of Treasury will sell Treasury bills (T-bills) which promise the owner repayment through several years with interest. The Federal Reserve can then write a check (electronically) to purchase those T-bills from interested sellers. If the Federal Reserve writes a check for $1 billion of T-bills this is how the money supply would increase by $1 billion. This is a great way to fund massive government programs such as the wars we’ve won and lost in addition to the never-ending “War on Poverty” and the war on drugs. Unfortunately, this system benefits Wall Street bankers and D.C. politicians while causing recessions that overwhelm the poor and harm the middle class.

The problem with the Fed isn’t that the idea was created in secret by politicians and bankers but that it causes economic booms and busts. In September of 2003, Dr. Ron Paul spoke before the House Financial Services Committee, arguing that federal subsidies to housing were merely setting the country up for a housing crash and the Fed’s inflation would merely postpone the day of reckoning and make it more painful. He knew this because he understood that the Fed had artificially kept interest rates low and increased the money supply. When the financial crisis of 2008 came, his warnings were vindicated while mainstream economists were surprised and shocked.

Inflation in Colorado is not caused by high oil or gas prices but by the fact that we continue to suffer under the failed policies of our central bank. We are stuck with high inflation if we have the Fed and until we return to some sort of Bitcoin- or precious-metal-standard. The Taxpayer Bill of Rights requires that Colorado residents approve any increase in taxes. Although Milton Friedman said “Inflation is taxation without legislation” he is not quite correct. Inflation is a crime worse than taxation because it devalues our hard-earned dollars and punishes those who save for the future. Because inflation is caused by an increase in the money supply, Dr. Ron Paul was right in his prescribing the cure: END THE FED.

Karl Honegger is a certified treasury professional and a member of the Emerging Leaders Council with the Steamboat Springs-based Steamboat Institute. He has worked in the petroleum industry for oil and natural gas companies and now works in financial reporting for a health-care company.