James Pethokoukis

Politics and policy from inside Washington

Or maybe it is time to shutter the Fed …

July 31, 2009

It took my pal John “The Professor” Tamny of RealClearMarkets about a nanosecond to respond to my blog column about Ron Paul’s plan to audit the Fed. He let loose with both barrels:

The Constitution empowers Congress to “Coin Money, and Regulate the Value Thereof”.  For Congress not to audit/control the Fed would be unconstitutional.  And while I don’t think we need physical gold backing every dollar as Paul wishes, this notion that the Fed needs to conduct “monetary policy” is absurd.

All we need is price rule whereby the dollar has a fixed, redeemable value.  Why we allow a bunch of academics with terrible track records do much of anything is beyond me.  We don’t need policy, we just need a dollar-price rule and that wouldn’t require the Federal Reserve. The Fed’s ability to create money at will has zero to do with economic growth.

Come on Jim, don’t go all statist on me.

Me: I am concerned that we wouldn’t get a dollar price rule but a Congress actively influencing monetary policy. I don’t want to trade Bernanke for Pelosi & Company. I would like a price rule, though.

Comments

Fed monetary policy is obviously becoming less and less important in a globalized world market where foreign investment can increase the domestic money supply. Eventually, as we have already somewhat seen, other countries will dictate our monetary policy, not us. See China.

Posted by Greg | Report as abusive
 

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