A remarkable confluence of recent events has brought unprecedented
but very welcome attention to both U.S. monetary policy
and the global political economy in general.
First, Federal Reserve Board Chairman Ben Bernanke recently
announced that the Fed would embark upon another round of
monetary easing by purchasing $600 billion worth of U.S.
Treasury debt. This amounts to an admission that markets
have run out of patience with our profligacy, and therefore
our own central bank literally must serve as the buyer of
last resort for Treasury debt.
Second, World Bank president Robert Zoellick openly suggested
that gold could play a helpful role in the global monetary
system by serving as reference against more volatile fiat
currencies. This is almost heresy coming from a neoconservative
globalist like Mr. Zoellick. It hints at an obvious but
unspoken truth that is anathema to politicians and central
bankers alike: namely, that gold could be viewed as….
money!
Finally, Mr. Obama attended the G20 summit in South Korea
last week and found a very chilly reception for his vision
of American economic policy. Mr. Obama argued for continued
worldwide stimulus, via continued debasing of the U.S. dollar,
to bolster American exports. Several powerful European and
Asian finance ministers, however, rejected this approach
out of hand as nothing short of a currency war. They are
committed to austerity measures at home, and don't want
to let the U.S. simply monetize its past sins at their expense.
All of these events culminated in a tremendous amount
of political and media scrutiny aimed the Fed. Ordinary
Americans are demanding answers and accountability, and
they are putting heat on their political representatives
in Washington to end the cozy “independence”
from congressional oversight the Fed has enjoyed for so
long.
In the 35 years I have been studying, speaking, and writing
about monetary policy I have never before seen Congress
or the financial press pay much attention to the Fed. Monetary
policy has always been considered boring on Capitol Hill,
something left to remote policy wonks far away from the
din of presidential or congressional politics. Congress
always has been eager to leave Fed governors well alone,
with no oversight or accountability, as long as they played
along and papered over the growing budget deficits.
But it's amazing what a global economic meltdown will do
to the political and media landscape. In just two short
years, the Fed has become the hot topic and a lightning
rod for criticism. While it is gratifying to see so many
formerly uninterested politicians, economists, talk show
hosts, and pundits suddenly rally to attack the Fed, one
can only wonder whether they truly understand that central
banking is inherently incompatible with our Constitution
and a free market economy.
In other words, it's not enough to show outrage at the
latest Fed action or argue about the relative merits of
Mr. Bernanke compared to his predecessors. To reclaim our
dollar and our economy, Americans must oppose central banking
per se. Fiat currencies cannot be “reformed”
or “managed.” They are fundamentally subject
to ruinous debasement courtesy of the political and economic
ruling class. History shows that this is true in all nations
at all times.