This week, Federal Reserve Chairman Ben Bernanke will deliver his semiannual testimony before Congress defending his reckless monetary stimulus. He will testify before the Senate Banking, Housing and Urban Affairs Committee today and the House Financial Services Committee on Wednesday. Now is a good time for Republicans to demand more accountability from the fourth branch of government – the one not mentioned in the Constitution.
It is amazing to watch how many Republicans will speak with such conviction against Keynesian fiscal stimulus policies, yet they will fervently promote monetary stimulus policies by the unaccountable Federal Reserve. Their support for near-zero interest rates, quantitative easing, bailouts, and intervention in the housing sector has muddled our message against Obama’s anti-free-market policies. Moreover, in this time of record commodity prices, pro-(monetary) stimulus Republicans preclude us from showing how government intervention on behalf of special interests distorts the markets, depletes savings, and devalues the currency – a winning political argument if there ever was one.
However, even those who place unflinching trust in Ben Bernanke’s economic acumen must agree that there is something fundamentally wrong when one unelected man has so much power without any oversight. How could anyone who respects a representative republic blithely ignore the unlimited power of one unelected individual to grow the Fed balance sheet to over $3 trillion, placing the fate of the entire economy in Bernanke’s ability to prudently unload that balance sheet? Shouldn’t there be some congressional oversight?
Congressman Jim Jordan (R-OH), the Chairman of the Oversight Subcommittee on economic growth, believes this to be a fair question. Jordan has sent a letter to Fed Chairman Ben Bernanke requesting him to turn over documents detailing how he plans to unload the $3 trillion Fed balance sheet. With the Fed purchasing $40 billion in treasuries and $45 billion in mortgage-backed securities per month, they will need to explain how to unwind without selling these bonds at a loss, contends Jordan.
Congressman Jordan also points out the often forgotten aspect of the monetary stimulus:
Most strikingly, by maintaining low interest rates, the Federal Reserve has distorted the real cost of the national debt, effectively “incentiviz[ing] the U.S. government to borrow and overspend.”
The debacle we face concerning the dependency created by monetary stimulus is eerily similar to the problems with interventionist fiscal policy. Just take a look at the panic over the sequester. When government crowds out the private sector and distorts the market with interventions and subsidies, we are then faced with the “calamity” that would ensue from disengaging from those policies. This is how the statists have successfully dissuaded us from ever limiting government. “You really plan to pull the rug out from under….such and such industry,” bemoans the forces of special interests. There is no reason we should allow the Fed to use monetary stimulus in such an officious manner that the entire economy would collapse without the monetary morphine, yet we incur so many problems from the intervention in the first place.
There is nothing that exemplifies the vices of big-government doctrine and the virtues of free market doctrine than the rising cost and depleting savings of the American people. Republicans need to seize the mantle of free market populism both in the realm of monetary and fiscal policy.
The reason why the statists are so successful is because their policies, which engender the problems they purport to solve in the first place, have the ability to self-perpetuate. They create market distortions and dependency and warn of financial collapse without them. We already tolerate this tyranny from our elected officials; there’s no reason we should put up with it from the unelected politburo at the Federal Reserve.