• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Economy Congress Can Restore the Integrity of the Dollar
Economy

Congress Can Restore the Integrity of the Dollar

by December 7, 2022
by December 7, 2022 0 comment
Share
0
FacebookTwitterPinterestWhatsapp
First published by The Hill

All government agencies try to maximize power and minimize accountability, but the Federal Reserve is in a league of its own. What began as a quasi-public clearinghouse with the limited function of stopping bank runs has evolved into a monetary-regulatory behemoth. Its sphere of influence has grown despite its failures, of which 40-year-high inflation is the most recent but by no means the worst.

Constitutionally, the Fed answers to Congress. It’s time for legislators to take back the reins. Three bills recently filed by congressional Republicans – the Gold Reserve Transparency Act of 2021, the Price Stability Act of 2022 and a yet-to-be titled act, H.R. 9157, linking the dollar to gold – can bring the Fed to heel. All Republicans and moderate Democrats should consider them carefully.

We can’t afford an out-of-control Fed much longer. America’s central bank has blurred the line between fiscal and monetary policy beyond recognition. Washington ran $6 trillion in deficits during the COVID-19 years; the Fed added $3.3 trillion to its balance sheets over the same period. That’s more than 50 percent indirect debt accommodation by monetary policymakers.

Our de facto experiment with Modern Monetary Theory has subjected millions of Americans to crippling price hikes. While inflation appears to be cooling down, prices are still rising more than three times as fast as the Fed’s official goal. In fact, Fed officials don’t expect prices to return to normal until 2025. So much for aggressive tightening.

What are our options for reform? All three bills mentioned above subject the Fed to the discipline of rules. Congress gave the Fed its famous “dual mandate” of full employment and stable prices in 1977, but those goals are hopelessly vague. They give the Fed an excuse for its mistakes. For example, the Fed failed to curb inflation partly because it was committed to easy money, which it thought would keep labor markets tight. The problem is the Fed decides for itself how to interpret its mandate. Congressional Republicans are rightly trying to return this authority to the people’s representatives.

Rep. French Hill’s (R-Ark.) Price Stability Act is a simple reform with far-reaching implications. As the bill’s title suggests, it would strike the “full employment” plank from the Fed’s mandate. The central bank would aim for price stability alone. This is a welcome improvement, since the dollar’s purchasing power is one of the few things the Fed controls. The only way the Fed can help labor markets is through ordinary monetary policy. If we achieve stable prices, we get full employment as a bonus, as even many Keynesian economists acknowledge.

The other two bills, sponsored by Rep. Alexander Mooney (R-W.V.), would bind the Fed’s hands even tighter. Instead of tweaking our fiat money system, why not go for gold? Commodity money is history’s most successful example of rule-bound monetary policy. Rep. Mooney’s first bill would ascertain just how much gold the federal government, including the Fed, owns. The bill calls for the Government Accountability Office to report on U.S. gold holdings every five years. 

Regular gold audits are an important stepping-stone to the second bill’s goal: redefining the dollar in terms of gold. The text of the bill rightly asserts that the American money supply should be “controlled by the market not the government.” By reintroducing a gold-backed dollar, we can get the Fed out of the business of managing the money supply. This will raise red flags for many economists. It shouldn’t. Contrary to the triumphant narrative among monetary technocrats, the Fed did not obviously improve U.S. economic performance, even if you give it a pass on the tumultuous years between the Great Depression and World War II.

Inflation averaged a mere 0.21 percent per year before the Fed. But since World War II, it’s been 3.70 percent per year. The economy has also gotten less productive. Average growth was 4.12 percent in the pre-Fed years compared with 2.25 percent in the years since the war. There were no compensating benefits in terms of economic stability; recessions have not become less frequent or lengthy.

The only data point that breaks the Fed’s way is inflation volatility. But even here, the Fed deserves no credit. It’s an artifact of inflationary Civil War finance: suspend the gold standard, print greenbacks, slowly deflate after the emergency ends. The historical record is clear: Gold-backed money is fully capable of delivering short-run stability and long-run prosperity. The Fed can’t.

The Fed has many backers in the capital. They would fight these reforms tooth and nail. Victory means assembling a sustainable legislative coalition. Inevitably the bills would change to build the necessary support. But the core idea – curbing the Fed’s ability to act as a law unto itself – is worth supporting. For Republicans, the appeal is obvious. But there are benefits for moderate Democrats, too. The Fed is the chief culprit behind the enrichment of Wall Street at the expense of Main Street. And with inflation persisting at painful levels, citizens will demand relief from both parties’ politicians. Reining in the Fed has always been good economics; now it’s good politics, too.

You Might Also Like
  • Republican presidential candidate Ryan Binkley drops out, endorses Trump
  • Putin thanks Kim Jong Un for supporting Russian invasion of Ukraine as nations sign mutual defensive pact
  • Former NYC buildings official to turn himself in on indictment linked to Eric Adams campaign donors: reports
  • Merrick Garland’s fate hangs in balance as House begins contempt vote
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Semtech’s LoRa® Devices Optimize Building Management Systems in U.S.
next post
2022 in the stock market: why it hasn’t been that bad

You may also like

Netanyahu rejects Palestinian state in postwar scenario, prompting criticism from...

January 20, 2024

16 Dems vote with GOP to rebuke Biden’s pausing Israel...

May 17, 2024

Top GOP lawmaker believes he can ‘fix’ Social Security

April 7, 2024

‘Radical feminist’ groups break with Biden, join GOP in support...

April 20, 2023

Dogecoin and Shiba Inu: Dogecoin in retreat since last night

October 17, 2024

Balance of power: Senate GOP’s campaign chair cautiously optimistic about...

May 12, 2024

McCarthy signals House could soon vote on short-term spending bill...

September 27, 2023

Trump tells GOP to ‘pass the SAVE Act’ or ‘go...

July 10, 2024

Billions invested in Haiti since 2010 earthquake have not improved...

March 16, 2024

NYC to shelter 1,000 migrants in mental hospital parking lot

July 27, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,633 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,321 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,303 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Presidential debate: Incumbent usually struggles with...

    July 3, 2024

    Influx of illegal Chinese migrants threatens...

    February 5, 2024

    When Federal Interest Payments Come to...

    January 5, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here