The Fed Blinks Too Often
Here is a letter to the Chicago Tribune:
Suggesting the members of the Federal Reserve are the only “grown-ups” in the room providing “leadership in the storm” is rich with irony (The Fed didn’t blink, August 10). Granted, the Fed’s job is difficult; however, central economic planning is always difficult since it hasn’t worked throughout our nation’s history.
Inflation is not a “distant threat” – it is a perpetual threat. Since the passage of the Federal Reserve Act in 1913, the money supply has been in an almost constant state of expansion. The value of the dollar suffered as a result, losing nearly 90% of its value. The recent rounds of quantitative easing further expand the money supply while achieving no economic benefit as markets continue to slump and growth remains anemic.
Furthermore, the policy of bailout economics is as far from responsible as it gets. Creating trillions of dollars out of thin air to prop up failed institutions is antithetical to free market capitalism by interfering in the natural boom-bust business cycle, eschewing the necessary market self-correction. We are currently experiencing the repercussions – while banks are doing great, the federal government is teetering and the American people bear the burden.
Regardless of any “pressure” on the Fed to take action in the wake of the debt deal, S&P downgrade, and subsequent market reactions, their previous behavior led us down this road. Reckless money printing and manipulation of interest rates will not bring about “maximum employment and stable prices.” Only market demand can determine wages, prices, interest rates, and the like – not the Federal Open Market Committee.
Craig D. Schlesinger