April 9, 2007
I had the opportunity to question Federal Reserve Chairman Ben Bernanke when he
appeared before the congressional Joint Economic committee.
The topic that morning was the state of the American economy, and many of
my colleagues raised questions about how the Fed might better
"regulate" things to ease fears of an economic downturn.
The tenor of my colleagues' questions suggested that Mr. Bernanke's job
is nothing less than to run the U.S. economy, like some kind of Soviet central
it’s true that Mr. Bernanke can drastically affect the economy at the drop of
a hat, simply by making decisions about the money supply and interest rates.
But why do members of Congress assume this is good?
Why do we accept without objection that a small group of people on the
Federal Reserve Board wields so much power over our economic well-being?
Is centralized, monopoly control over our money even compatible with a
supposedly free-market economy?
Americans give much thought to the Federal Reserve System or monetary policy in
general. But even as they strive to earn a living, and hopefully save
or invest for the future, Congress and the Federal Reserve Bank are working
insidiously against them. Day by
day, every dollar you have is being devalued.
greatest threat facing America today is not terrorism, or foreign economic
competition, or illegal immigration. The
greatest threat facing America today is the disastrous fiscal policies of our
own government, marked by shameless deficit spending and Federal Reserve
currency devaluation. It is this
one-two punch— Congress spending more than it can tax or borrow, and the Fed
printing money to make up the difference— that threatens to impoverish us by
further destroying the value of our dollars.
Fed’s inflationary policies hurt older people the most.
Older people generally rely on fixed incomes from pensions and Social
Security, along with their savings.
Inflation destroys the buying power of their fixed incomes, while low
interest rates reduce any income from savings.
So while Fed policies encourage younger people to overborrow because
interest rates are so low, they also punish thrifty older people who saved for
financial press sometimes criticizes Federal Reserve policy, but the validity of
the fiat system itself is never challenged.
Both political parties want the Fed to print more money, either to
support social spending or military adventurism.
Politicians want the printing presses to run faster and create more
credit, so that the economy will be healed like magic- or so they believe.
Fiat dollars allow us to live beyond our means, but only for so long.
History shows that when the destruction of monetary value becomes
rampant, nearly everyone suffers and the economic and political structure
becomes unstable. Spendthrift politicians may love a system that generates more
and more money for their special interest projects, but the rest of us have good
reason to be concerned about our monetary system and the future value of our