Will Bernanke Ever Learn?

Thursday, January 26th, 2012 and is filed under Blog

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Over the past few years, Ben Bernanke and the Fed have engaged in two rounds of quantitative easing; they have bought up $2 trillion in treasury securities; they have kept interest rates near zero.  These actions have devalued our currency and have depleted our savings.  A weak dollar is a hidden tax on all Americans, yet the Federal Reserve has continues to promote a lose money policy so cheap capital can flow to government and Wall Street.

So what was the rationale for all this monetary stimulus?  We were warned incessantly by Fed Chairman Ben Bernanke that low interest rates and easy money were vital to pumping up the economy and lowering unemployment.  Well, the verdict is in, and those policies have not worked.  Much like fiscal stimulus packages, monetary stimulus artificially injects more temporary money into the economy to the detriment of long-term economic growth.  After all of the destructive monetary policies, we are left with nothing but an unstable currency.

Yesterday, in the Fed’s “longer-run goals and policy strategy” statement, Bernanke admitted that we will suffer economic stagnation and high unemployment for the foreseeable future.  Yet, he is planning to keep interest rates low, and even hinted at another round of quantitative easing, all for the purpose of lowering unemployment.  Bernanke promised that “if there is a need to let inflation return a little bit more slowly to target to get a better result on unemployment, then that is something that we would be willing to do.”

Memo to Bernanke: We have already tried those policies, and they have failed to achieve job growth.  The only thing they have done is precipitate the downfall of the dollar.

It is abundantly clear that we must end the Fed’s mandate to tinker with the economy.  In 1977, Congress vested the Federal Reserve with a dual mandate of stimulating the economy and job growth in addition to keeping a stable currency.  This has allowed the Fed to become a fourth branch of government by initiating its own stimulus policies of printing money.  These stimulus policies exacerbate the fiscal stimuli of the other branches of government by devaluing the remaining dollars that we own (non-borrowed money).

It’s time to repeal that law and force the Fed to singularly focus on currency stability.  Or, we could just continue to double down on failure.