Originally posted on Thursday, May 09, 2013
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The South China Morning Post recently reported, in an article headlined Kunming Mother sues US Central Bank over shrinking cash, that:
A woman in Kunming, Yunnan province, is trying to sue the United States central bank after discovering that the real value of the US $250 she put in an account in 2006 had shrunk by 30 per cent.
She claims it was a result of the Federal Reserve issuing too much money.
Her attorney, her son Li Zhen, called the lawsuit “litigation for the public good” which aimed to stop the Fed from continuing its quantitive easing policy and promote people’s awareness of their rights.
He filed the lawsuit alleging “the abuse of monopoly in issuing currency” last month at the Kunming Intermediate People’s Court on behalf of his mother, Liu Hua, but the court has yet to decide whether to officially place the case on file.
There are many arcane technical issues which make the acceptance of this litigation dubious. Yet the fundamental point — that one of the implicit duties in the management of a fiduciary currency is a moral duty meticulously to maintain its value — is one that seems beyond dispute. And, with the value of the American dollar having eroded by around 95% since the inception of the Federal Reserve System — a dollar today is worth a 1913 nickle — that duty has been breached. This surely is not because of bad faith on the part of the governors of the Federal Reserve System. But a fiduciary duty is a high one. Higher than mere good faith.
As defined by West’s Encyclopedia of American Law a fiduciary duty represents:
An individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit.
A fiduciary relationship encompasses the idea of faith and confidence and is generally established only when the confidence given by one person is actually accepted by the other person. Mere respect for another individual’s judgment or general trust in his or her character is ordinarily insufficient for the creation of a fiduciary relationship. The duties of a fiduciary include loyalty and reasonable care of the assets within custody. All of the fiduciary’s actions are performed for the advantage of the beneficiary.
If central banking authorities wish to administer monetary policy as fiduciaries, rather than by simply managing a charge to maintain the currency as a fixed weight of gold, those authorities must hold themselves to account at this highest of standards. And if they fail to hold themselves to account, it is appropriate to hold them to account, if not in a court of law then in the court of public opinion.
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