The Fed is tasked with keeping America fully employed as well as keeping inflation low. When employment is sagging, the Fed lowers interest rates. When inflation roars, the Fed raises interest rates. The problem is that the two tasks oppose one another. This is a broken system. For evidence, look at my chart. As oil and asset prices grew into a bubble from January 2007 into July of 2008, the Fed did not have the option to crush inflation with increased interest rates because the rate of job creation had been declining since November of 2005. In September 2007, the Fed took the politically popular route and decreased interest rates in response to declines in employment. Seeing employment about to crater in January 2008, the Fed decided to put the pedal down on monetary policy and drop interest rates to the floor hoping that the ensuing recession would pop the asset bubble. That it did, in a terrific fashion.
The Fed needs drastic change. The first step in that change is transparency. H.R.1207 allows Congress to audit the Federal Reserve’s operations more easily. Please urge these congressmen on the House Financial Services Committee to support H.R.1207.
Click here for a list of member of the House Financial Services Committee
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