What Did My Parents Ever Do To The Federal Reserve?

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In September 1993, President Bill Clinton reassured his radio audience that “if you work hard and play by the rules, you’ll be rewarded with a good life for yourself and a better chance for your children.” Picking up that theme over 18 years later, President Barack Obama affirmed that “Americans who work hard and play by the rules every day deserve a government and a financial system that does the same.” The trouble is neither the government nor the financial system backed by the Federal Reserve rewards people like my parents, who have worked hard and played by the rules their entire lives–only to have their savings wither away.

Instead, Federal Reserve officials and the intelligentsia who support them are continuously working to make their lives more difficult, frightening the masses of what shoppers look for every day—lower prices. Price deflation, the cry, is disastrous for the economy. They worry that lower prices will reduce profits, leading to shutdowns and lay-offs, and that lower prices make it harder for people to pay their debts. Sound economic theory and history, however, both indicate that price deflation is nothing the social economy needs to fear. If prices fall because the economy is more productive, this is unambiguously positive. However, if prices fall because people spend less, their desire is for larger real cash balances. Falling prices help them achieve their goal, which precisely is the purpose of economic activity.

Lower prices and wages can make it harder to pay fixed debt. This, however, serves as an excellent incentive to stay out of debt in the first place, as my parents have done as a result of significant sacrifice. Before creating even more money out of thin air to ward off lower overall prices, we should at least consider some of the ethical issues involved.

Many men from my father’s generation are not unlike John Adams, who wrote to his wife that he “must study politics and war, that our sons may have liberty to study mathematics and philosophy.” My father embarked on 20 years of hard labor in a meat packing plant providing for his family until he lost his job due to his union pricing him and his fellow workers out of a job. When his plant closed in the mid-1980s, he embarked on a second successful career with my mother, operating their own barbecue business for another 20-plus years. I saw firsthand the challenges they faced trying to keep quality up and costs down, while producing top-drawer barbecue meat and sandwiches for a demand that was always uncertain. I saw the stress on my mother’s face one week in the early days when they netted a mere $15 before taxes. My father indeed “studied” meat packing and barbecue, in part, so I could go to college and become an economist and college professor.

Additionally, mom and dad had the foresight and character to make the sacrifices necessary to stay out of debt. Indeed, they are Paul Krugman’s worst nightmare—a family determined not to live beyond their means. Now retired, like many in their generation, they are enjoying life the best they can on an almost fixed income. Because they have no debt, they have been able to live without tremendous economic hardship thus far. The Federal Reserve’s inflationism, however, increasingly makes life for them more difficult as steady price inflation daily chips away at their livelihood. Since 2009, for example, the Consumer Price Index has increased over nine percent. This masks, however, significantly larger price increases for important necessities. Prices of dairy products are up almost 17 percent since 2009. Gasoline prices are up almost 11 percent despite the recent decline. Prices for meat, poultry, fish, and eggs have increased a whopping 26 percent since 2009. Higher overall prices do not help people like my parents at all. They instead act as a thief, snatching wealth away from them in the form of diminished purchasing power. What they long for is to see the value of their savings increase. Far from creating economic hardship for them, lower overall prices would be a boon.

Both sound economics and ethics, therefore, demand that we give up the anti-deflation rhetoric and the inflation it fuels. Charity demands that we cease striking fear into the hearts of the masses, softening them up for ever higher prices. The Federal Reserve should stop punishing people like my parents who have worked hard and played by the rules their whole lives. After all, what did they ever do to Greenspan, Bernanke, and Yellen?

Dr. Shawn Ritenour is a professor of economics at Grove City College, contributor to The Center for Vision & Values, and author of “Foundations of Economics: A Christian View.”

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Don’t Be Fooled By The Fed’s Anti-Audit Propaganda

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In recent weeks, the Federal Reserve and its apologists in Congress and the media have launched numerous attacks on the Audit the Fed legislation. These attacks amount to nothing more than distortions about the effects and intent of the audit bill.

Fed apologists continue to claim that the Audit the Fed bill will somehow limit the Federal Reserve’s independence. Yet neither Federal Reserve Chair Janet Yellen nor any other opponent of the audit bill has ever been able to identify any provision of the bill giving Congress power to dictate monetary policy. The only way this argument makes sense is if the simple act of increasing transparency somehow infringes on the Fed’s independence.

This argument is also flawed since the Federal Reserve has never been independent from political pressure. As economists Daniel Smith and Peter Boettke put it in their paper “An Episodic History of Modern Fed Independence,” the Federal Reserve “regularly accommodates debt, succumbs to political pressures, and follows bureaucratic tendencies, compromising the Fed’s operational independence.”

The most infamous example of a Federal Reserve chair bowing to political pressure is the way Federal Reserve Chairman Arthur Burns tailored monetary policy to accommodate President Richard Nixon’s demands for low interest rates. Nixon and Burns were even recorded mocking the idea of Federal Reserve independence.

Nixon is not the only president to pressure a Federal Reserve chair to tailor monetary policy to the president’s political needs. In the fifties, President Dwight Eisenhower pressured Fed Chairman William Martin to either resign or increase the money supply. Martin eventually gave in to Ike’s wishes for cheap money. During the nineties, Alan Greenspan was accused by many political and financial experts — including then-Federal Reserve Board Member Alan Blinder — of tailoring Federal Reserve policies to help President Bill Clinton.

Some Federal Reserve apologists make the contradictory claim that the audit bill is not only dangerous, but it is also unnecessary since the Fed is already audited. It is true that the Federal Reserve is subject to some limited financial audits, but these audits only reveal the amount of assets on the Fed’s balance sheets. The Audit the Fed bill will reveal what was purchased, when it was acquired, and why it was acquired.

Perhaps the real reason the Federal Reserve fears a full audit can be revealed by examining the one-time audit of the Federal Reserve’s response to the financial crisis authorized by the Dodd-Frank law. This audit found that between 2007 and 2010, the Federal Reserve committed over $16 trillion — more than four times the annual budget of the United States — to foreign central banks and politically influential private companies. Can anyone doubt a full audit would show similar instances of the Fed acting to benefit the political and economic elites?

Some fed apologists are claiming that the audit bill is part of a conspiracy to end the Fed. As the author of a book called End the Fed, I find it laughable to suggest that I, and other audit supporters, are hiding our true agenda. Besides, how could an audit advance efforts to end the Fed unless the audit would prove that the American people would be better off without the Fed? And don’t the people have a right to know if they are being harmed by the current monetary system?

For over a century, the Federal Reserve has operated in secrecy, to the benefit of the elites and the detriment of the people. It is time to finally bring transparency to monetary policy by auditing the Federal Reserve.

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Don’t ‘Audit The Fed’ – Abolish It

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In recent remarks to the Senate Banking Committee, Federal Reserve Chairwoman Janet Yellen (pictured above) was her typical evasive and non-committal self when the topic of interest rate hikes were broached. When the subject of potential oversight of the Fed came up, however, Ms. Yellen became quite forthright in her response.

When asked about a bill introduced by Kentucky Senator Rand Paul to “Audit the Fed,” Ms. Yellen declared: “I want to be completely clear: I strongly oppose ‘Audit the Fed.’”  Ms. Yellen defended her position on the grounds (which have been given by every previous Fed Chairman) that oversight would lead to politicized monetary decision making, thus compromising the central bank’s “independence.”

Senate Banking Chairman, Richard Shelby, R-Ala., countered the Chairwoman, saying “there is an even greater need for additional oversight” of the Fed since the onset of the financial crisis in 2007.

Ms. Yellen, her predecessors, and every other Fed apologist are simply wrong when they assert that the central bank is an independent agency that is free of political influence. The Federal Reserve System was created by an act of Congress (1913) and can ultimately be “reformed,” altered, and/or abolished by Congressional fiat if so desired.

That Congress does not oversee Fed policy is a result of its charter, which was originally crafted by the Big Banksters of the time (mostly the Rockefellers and Morgans) in concert with their bought-and-paid-for politicians. The lack of oversight was a deliberate part of their plan to give bankers and financers free reign to conduct monetary policy for their own benefit.

The Federal Reserve is and has always been a political creature designed for the benefit of financial elites. It is a highly privileged cartel with monopoly control of the nation’s money supply. Unlike the propaganda that emits from Fed officials, the central bank was instituted to protect banksters from financial collapse and bank runs. Fine-tuning the economy, reducing unemployment, or fighting inflation are all ancillary concerns for the Fed.

These are the simple facts that are deliberately kept from the public at large by the political establishment, academia, and the media.

The Audit the Fed movement, which began in earnest with Ron Paul’s first presidential run, is a wrongheaded approach to solve the nation’s ongoing financial crisis. Senator Rand Paul’s bill is mostly grandstanding to bolster his status among the Republican Party’s populist contingent in his anticipated race for the nomination.

In fact, instead of meaningful reform, greater public oversight of the Fed would most likely lead to worse results. Every Congressman and Senator would be pressuring the central bank to fund their pet projects. Can one imagine what the growth rate of the money supply would be if 535 ravenous politicians had a say in the conduct of monetary policy?!

Those who want to reverse the nation’s economic malaise should seek the Federal Reserve’s abolition and advocate its replacement with a de-politicized monetary order free of central banking. Such a system would most likely be based on a commodity (gold and/or silver) where “money producers” are free to engage in the creation of the “best money” and banking services to satisfy customers’ needs.

In such an order, banks would function as any other enterprise by profit and loss. If banks loan funds wisely, they will succeed; if not, they will fail and go out of business, replaced in the marketplace by more savvy entrepreneurs. There will be no bailouts at taxpayers’ expense for reckless financial speculation. Money and banking would become a sound and honest undertaking.

To actually believe that an Audit the Fed initiative would become law is beyond naïve. The political establishment will never voluntarily relinquish or allow any legitimate oversight of one of its chief pillars of power.

Instead of seeking change via politics, reformers must first change the climate of public opinion–which can only be accomplished when the prevailing ideology is debunked. Until the Federal Reserve is seen as an engine of inflation and the creator of economic disorder that needs to be eradicated, America’s financial woes will, unfortunately, continue.

Antonius Aquinas@AntoniusAquinas

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

All I Want For Christmas Is A (Real) Government Shutdown

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The political class breathed a sigh of relief Saturday when the US Senate averted a government shutdown by passing the $1.1 trillion omnibus spending bill. This year’s omnibus resembles omnibuses of Christmas past in that it was drafted in secret, was full of special interest deals and disguised spending increases, and was voted on before most members could read it.

The debate over the omnibus may have made for entertaining political theater, but the outcome was never in doubt. Most House and Senate members are so terrified of another government shutdown that they would rather vote for a 1,774-page bill they have not read than risk even a one or two-day government shutdown.

Those who voted for the omnibus to avoid a shutdown fail to grasp that the consequences of blindly expanding government are far worse than the consequences of a temporary government shutdown. A short or even long-term government shutdown is a small price to pay to avoid an economic calamity caused by Congress’ failure to reduce spending and debt.

The political class’ shutdown phobia is particularly puzzling because a shutdown only closes 20 percent of the federal government. As the American people learned during the government shutdown of 2013, the country can survive with 20 percent less government.

Instead of panicking over a limited shutdown, a true pro-liberty Congress would be eagerly drawing up plans to permanently close most of the federal government, staring with the Federal Reserve. The Federal Reserve’s inflationary policies not only degrade the average American’s standard of living; they also allow Congress to run up huge deficits. Congress should take the first step toward restoring a sound monetary policy by passing the Audit the Fed bill, so the American people can finally learn the truth about the Fed’s operations.

Second on the chopping block should be the Internal Revenue Service. The federal government is perfectly capable of performing its constitutional functions without imposing a tyrannical income tax system on the American people.

America’s militaristic foreign policy should certainly be high on the shutdown list. The troops should be brought home, all foreign aid should be ended, and America should pursue a policy of peace and free trade with all nations. Ending the foreign policy of hyper-interventionism that causes so many to resent and even hate America will increase our national security.

All programs that spy on or otherwise interfere with the private lives of American citizens should be shutdown. This means no more TSA, NSA, or CIA, as well as an end to all federal programs that promote police militarization. The unconstitutional war on drugs should also end, along with the war on raw milk.

All forms of welfare should be shut down, starting with those welfare programs that benefit the wealthy and the politically well connected. Corporate welfare, including welfare for the military-industrial complex that masquerades as “defense spending,” should be first on the chopping block. Welfare for those with lower incomes could be more slowly phased out to protect those who have become dependent on those programs.

The Department of Education should be permanently padlocked. This would free American schoolchildren from the dumbed-down education imposed by Common Core and No Child Left Behind. Of course, Obamacare, and similar programs, must be shut down so we can finally have free-market health care.

Congress could not have picked a worse Christmas gift for the American people than the 1,774-page omnibus spending bill. Unfortunately, we cannot return this gift. But hopefully someday Congress, will give us the gift of peace, prosperity, and liberty by shutting down the welfare-warfare state.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Currency Wars Lead To Real Wars

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“Beggar-thy-neighbor” is a term coined by Adam Smith long ago.  It describes efforts by countries to use protectionist trade and other economic policies to solve their internal economic problems. In short, it means we’ll cheat the other guy and pass the savings on to you.

This type of strategy can manifest itself in many ways. Governments can levy import duties, use adversarial regulatory tactics to protect their own industry, or the good-ole favorite, a competitive currency devaluation to make their exports cheaper.

The problem with currency devaluation is that your neighbor can play that game also. In the early part of the twentieth century, competitive currency devaluations were a large part of the cause of the horrific violence the world saw during the two world wars.

After World War II, the Bretton-Woods agreement attempted to prevent countries from using a devaluation to solve their internal problems. This worked for a while. However, with President Nixon taking the United States off the gold standard in the early 1970’s, the global economic consensus that followed the second world war has been largely eroded.

Today competitive currency devaluations are common, even encouraged and cheered. Governments now have no problem manipulating markets to their advantage, no matter the effect on their neighbors. The United States has been the largest player in this strategy.

In an effort to keep borrowing money and keep interest rates low, so the federal government can service the debt, the Fed has actively intervened in the bond market, printing upwards of five trillion dollars. This is a different form of a currency devaluation. By printing all this money, the Fed has attempted to make the USD worth less, in order to stimulate growth in exports as well.

Japan is the king of quantitative easing, or printing barrels full of money. Japan has printed so much money that now as the government prints even more, it’s like pushing on an economic string.

All of the bang for the buck is gone. Just ask the average person in Japan how Abenomics is working.

China is playing this game in different forms as well, and now the European Central Bank wants to get into the act in a grander fashion.

The problem is that no country has ever devalued its way to prosperity. On the contrary, all of this market manipulation at the expense of other nations will not end well. This is the way wars get started because at the end of the day, economic manipulation runs out of bullets; and the only thing a country has left are real ones.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom