Simply the most important article one can read this week. Succinct, to the point and absolutely true.
One of the most amazing stories right now is the failure of either
President Obama or Congress to address the monetary crisis. This is the
crisis Joe Six-Pack feels when he fills his car with gas or fetches up
at the supermarket checkout — or when he has a hard time finding a job.
Even as our money doesn’t seem to go as far as it used to just a few
years ago, Federal Reserve Chairman Ben Bernanke keeps insisting that
inflation is low. Yet the hottest story about Obama’s naming of a new
Fed chief has been what a New York Times dispatch called the decision’s
“gender undertones.”
The Times broke that “story” a few weeks ago. It was writing about
the conflict between those who favored a man, Lawrence Summers, a former
Treasury secretary, and those who favored a woman, Janet Yellen, the
current Fed vice chairman. Summers withdrew from consideration Sunday,
having lost the support of his own party, and it looks like Yellen is
now the frontrunner.
No one that I know has a problem with a woman heading the Fed; it
would be a dramatic crack in the glass ceiling. But where is the debate
about the role of the Federal Reserve itself in creating the Great
Recession and the crisis that has kept unemployment above 7 percent for
Obama’s entire presidency? The figure would be far worse if record
numbers of Americans hadn’t entirely given up on looking for work.
It happens that we are just now beginning to mark the 100th
anniversary of our country’s central bank: It was exactly 100 years ago
that Congress started to work on the legislation that created the Fed.
There will be centennial events over the coming year; the central bank
began operations in 1914.
At the time, the value of the dollar was fixed by law at a 20.67th of
an ounce of gold. Today, the value of the dollar isn’t fixed at all —
and the actual value of the dollar has collapsed to less than a 1,300th
of an ounce of gold. That’s higher than the nadir a year ago, but it’s
radically lower than the dollar has been under any previous president.
This is what we all feel when, say, we go to buy a tank of gas. Since
Bernanke became Fed chairman, the price of an average gallon has soared
54 percent to $3.52, even while the value of the gallon of gas has
plunged nearly 33 percent to 1/372nd of an ounce of gold.
In other words, it’s not the gas price that is going up, but the dollar that’s going down.
It’s not just gas. Over the same period, the monthly grocery bill for
a family of four jumped 25 percent to $1,036, while the value of those
groceries fell 45 percent to 0.79 ounces of gold.
And the average sale price of a new home rose 4.2 percent, but the value fell a staggering 54 percent to 257 ounces of gold.
Absent a dramatic turn of events, Bernanke will leave his successor
with a dollar that is less valuable by far than any dollar ever left by
any Fed chairman. In percentage terms, the plunge in the dollar’s value
on Bernanke’s watch is the second most dramatic in history.
The cover for him to do this is a 1978 law called Humphrey-Hawkins,
which gives the Fed the job not only of watching prices but of boosting
employment.
How has that worked out? The Fed has been ballooning its balance
sheet by billions — “not literally” printing money, Bernanke quipped
before Congress; it’s now done electronically — and the unemployment
rate is still stuck above 7 percent.
Congress has the chance to use the Fed anniversary to take a serious
look at whether the Fed is working the way it was intended. The chairman
of the Joint Economic Committee, Rep. Kevin Brady (R-Texas), is pushing
a bill to set up a Centennial Monetary Commission. He wants it to be a
serious, bipartisan group.
His colleagues haven’t yet agreed. It seems that Congress may prefer
to have a central bank that will pump out the funny money to cover the
deficits Congress lacks the backbone to control. This means that the
only way to force the issue is going to be through Tea Party politicians
and crises like the coming showdown over the federal debt limit.
At least until Joe Six-Pack runs out of gas.
Source: http://nypost.com/2013/09/18/money-the-crisis-washingtons-ignoring/
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