In The American Conservative, author and investment banker Christopher Whalen, takes aim at the Federal Reserve, saying that the President is right to have nominated critical outsiders to the Federal Reserve board of governors. Both of Trump’s nominees, businessman and former presidential candidate Herman Cain, and political economist Stephen Moore have advocated for a return to the gold standard, an affront to the academics currently running the Fed.
Fans of former presidential candidate Ron Paul can be somewhat encouraged by the President’s willingness to take on Federal Reserve orthodoxy. Whalen explains that the Fed is operating well outside its authority, and should be reined in. The Fed’s policy of explicitly targeting inflation expressly takes from savers and gives to speculators. Perhaps, as Ron Paul states, it is time to End the Fed. Whalen writes (abridged):
Last week, President Donald Trump set the economics community aflame by suggesting that he will appoint businessman and presidential aspirant Herman Cain to the Federal Reserve Board. Even more than political economist Stephen Moore, the critics maintain, Cain represents a threat to the cabal that has controlled the central bank for decades.
Why? Because Cain is a successful executive who founded a real business, took risks, and created jobs, things most academic economists will never ever do.
Anybody who cares to read the 1978 Humphrey Hawkins law will know that the Fed is directed by Congress to seek full employment and then zero inflation. Not 2 percent, but zero. Yet going back a decade and more, the Fed, led by luminaries such as Janet Yellen and Ben Bernanke, has advanced a policy of actively embracing inflation. And neither Bernanke nor Yellen bothered to consult Congress when they decided to discard their legal responsibilities.
Alex Pollock of the R Street Institute writes in American Banker:
One may wonder whether Fed independence is a technical or a political question. It is political. The nature and behavior of money is always political, no matter how much technical effort at measuring and modeling economic factors there may be. For example, the Fed over the last decade systematically took money away from savers and gave it to leveraged speculators by enforcing negative real interest rates. Taking money from some people to give it to others is a political act. That is why the Fed, like every other part of the government, should exist in a network of checks and balances and accountability.
The Federal Reserve is out of control, acting in ways and with powers that were never granted to it. Quantitative easing, “Operation Twist,” and the explicit 2 percent inflation target are just three examples of how the Federal Reserve Board is operating outside of its legal authority.
It’s high time that President Trump put some new faces at the Fed and started asking questions about what policies it follows and why.
Read more here.
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