Is it the FED's job to destroy the value of our currency? Shouldn't our currency become more, not less, valuable over time?
The main purpose of a currency is to facilitate business transactions. It's main purpose is not a store of value over time.
When the currency doesn't grow as fast as the supply of goods over time it causes deflation and deflation causes depressions. On the gold standard we had major severe depressions every 20 years. Shortly after the creation of the FED, we had the great depression, which was caused when the FED tried to reign in the growth of the money supply and tightened to fast. The FED learned from that and we've not had a depression since.
The great recession which we are now in, wasn't caused by the FED, it was caused by stupid trade policies which off-shored too many of our jobs, deregulation of the banking industry, and the failure to adequately prepare for another oil price shock after the 70's.
What you want is a small amount of inflation each year. That avoids deflation and the risk of a deflationary depression. It also provides an incentive for people and businesses to invest cash, rather than to hoard cash.
In a deflationary environment, you can increase your purchasing power just by holding cash. You don't need to invest. And that's one of the reasons it causes depressions, is that people stop investing.
I know the 100 year charts of the value of a dollar looks scary. But the fact is that only hurts people who wanted to hoard their money in their mattress for 100 years. It doesn't hurt people who put it in a savings account and make some interest or who invest in business and earn much more.
If you look at the year to year swings of the value of the dollar, the dollar since the FED has had less than half the variablity of the dollar under the gold standard. Under the gold standard we had year to year swings in the value of the dollar sometimes in excess of 20%. And that is bad for business.
No.
“Shouldn’t our currency become more, not less, valuable over time? “
If the dollar was based on gold or silver, not fiat as it is, it would roughly stay the same in value, give or take. $1 would buy the same amount of sugar in 1800 or in 2000. In a rough sense we have learned how to use machinery to get more gold per year but we also have more people and labor for the gold to represent. Therefore, it is a rough estimate that gold would remain constant in value. It sure beats the manipulated markets and currencies we have today.