U.S. Congress Outsources Responsibilities To Federal Reserve

Only two scholars worthy of mention have the temerity to speak their minds regarding a the deadly relation between a wimpish Congress and an arrogant Federal Reserve.  Dr. Allan Meltzer of the American Enterprise Institute and David Malpass, the former deputy assistant of U.S. Treasury under Reagan now residing as CEO of Encima Global have extensive correspondence critiquing how the Federal Reserve has arrogated to itself a role historically and constitutionally reserved to the President:  presiding over GOVERNING the best interests of the American people.

Absent a strong federal executive (read Reagan), what flourishes in the absence of leadership is naval gazing posturing as decisiveness.  When Alexis Tocqueville’s second volume of ‘Democracy In America’ critiqued the dangers of applied equality, whether political or financial, in an age of mass democracy, he was admonishing social and political dangers that arise in an age such as ours.  Congress and by extension this President have abdicated responsibility in favor of ‘the bread and circus’ that is contemporary liberal governance.

Chairman Bernanke spoke to the Federal Reserve Bank of Boston on Friday, in his speech he never spoke of two things that remain pressing on our economy:  a disastrously weak dollar and a failed Keynesian ‘stimulus’.  Both have wrecked the intellectual foundation that was Keynesian economics.  Friday’s speech ought to have addressed several urgencies like greater clarity on how the Federal Reserve is to regain its independence from Congress, the expansion of its mandate to eliminate unemployment, the fiscal train wreck that IS Congress, and public acknowledgement of an exit strategy.  All speak to imminent failure!  Instead, what Bernanke spoke to was differences in rates of inflation and how contemporary unemployment is cyclical and therefore subject to stimulus!  Clearly this chairman is out of intellectual armor from which to extricate this Republic.

The present state of unemployment is not cyclical and therefore related to a business cycle.  ITS STRUCTURAL.  Meaning the very nature of the workings of our economy have changed.  Today we are decentralized and global.  This insight has not penetrated the intellectual hubris that is Keynesian thought.  How else to explain Bernanke’s reluctance to accept the social, political and economic impact of excessive confiscatory taxation and regulation.

I am amiss to explain how it is that Bernanke can continue to provide cheap money for large entities (both government and multinationals) at the expense of pursuing pro growth policies.  We have structural unemployment, a failed stimulus, massive reallocation of capital to Asia (providing another housing bubble) and a historically weak dollar.  If Bernanke cannot see what every student of Hayek knows, he should be relieved of his authority.

Both Dr. Malpass and Dr. Meltzer have written extensively on how the contemporary Chairman is pursuing the same strategy (weak dollar, quantitative easing, low interest rates) that Allan Greenspan did between 2003-2006, effectively ushering in our present economic disaster.

27 million un/under-employment is not cyclical, nor can it be salvaged by weakening the dollar, purchasing Treasury Bills and excessive taxation.  Its simple:  return to classical macro-economics embodied in Fredrick Hayek.

Absent a complete political and intellectual conversion we cannot stop the Federal Reserves expansion plan.  This is what happens in the absence of a strong Executive who possesses the rigors of classical economics.

About William Holland

Systematic Theologian/International Relations
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