Ben Bernanke may have painted a big bullseye on the Federal Reserve when he spoke last week in Jackson, Wyoming, about the Fed providing additional stimulus if the economy needs it.
Although he wasn’t specific about what it might do and when it might do it, Bernanke clearly indicated that the Fed was ready to use the tools it had at it’s disposal to stimulate the economy given that (1) the recovery was not as robust as he thought it should be and (2) that additional fiscal policy stimulus measures were unlikely to be enacted in the current politics-of-obstruction political environment. As the minutes of its August meeting, which were released today, confirmed, Bernanke was definitely talking for a majority of the board of governors.
It’s not at all clear, however, whether Bernanke realizes that the same political pressure that has brought fiscal policy to a standstill in Washington is very likely to be applied to the Fed if it decides to move forward. With Republican policymakers seeing economic hardship as the path to election glory this November, there is every reason to expect that the GOP will be equally as opposed to any actions taken by the Federal Reserve that would make the economy better, and that Republicans will openly and virulently criticize the Fed for even thinking about it. The criticism is likely to come both before any action is taken to try to stop it from happening and afterwards to make the Fed think twice about doing more.
This will come in spite of the fact that, unlike fiscal policy changes, the actions the Fed is considering will not increase the budget deficit. The deficit has never really been the real issue; it has always been a subterfuge and an easy and convenient way to build opposition to the White House’s efforts to deal with the economy.
The GOP should have no trouble, therefore, pivoting away from the budget deficit and using some other reason for the Fed not to act. This might include a constitutional challenge to the Fed itself, a demand for Ron Paul-like legislation that would give Congress more oversight over the Fed, Glenn Beck-like criticisms that a handful of unelected Fed governors shouldn’t have the ability to formulate economic policy, and pointed criticism of specific Fed governors. It’s also not inconceivable that legislation will be introduced to take away some of the Fed’s powers, with the implicit threat being that it will be considered and adopted by a GOP majority next year.
If you’re not familiar with what this criticism might be, take a look at this clip from 2007 featuring Rep. Ron Paul (R-TX) questioning Bernanke:
The Fed is, of course, an independent agency. It does not rely on Congress for an annual appropriation and in some very important direct ways is immune from political retribution. But it’s not completely impervious to criticism and, given what it’s done so far on the fiscal policy side, it’s hard to believe that the GOP won’t use the tools it has at its disposal.
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Gee, it’s so hard to figure which side Stan Collender is on, LOL Man those evil, conniving Republicans, willing to derail any reasonable effort to fix the economy just so they can get back in power, right Stan?
Just so you know, Congressman Paul has no love of his own party. His views stem from his decades-long study of economics and monetary policy and his insistence that Congress and the president follow the US Constitution. He could care less which party is in power so long as they are pursuing constitutional government and sound economic policy.
If the GOP does follow Ron Paul’s lead on this then it will be much better for the country. But they have not done this so far nor have the democrats which is why we are in such a mess.
Maybe we should start listening to the guy (Ron Paul) who had everything right from the beginning.
“Bitter GOP Criticism of the Fed May Be Ahead”
Gee, that’s a few decades late, Dr. Paul has been a lone voice in the wilderness for decades but alas only a few listen and the ones is power never heed.
Remember what the Japanese general said right after Pearl Harbor?
He was afraid they had only awakened a sleeping giant.
The American public is being screwed like an old prostitute, and I believe we’ve had enough. Mr. Bernanke can be thanked for his smug responses to Ron Paul and anyone bold enough to ask him what he’s doing with our money…
It’s time to wash our dirty money laundry and push these corrupt money launderers into the dumpster…
#GOP will be equally as opposed to any actions taken by the Federal Reserve that would make the economy better
only idiot could think that FED in some magical way can improve situation… how ??? how to put 20% of population back to work?
what a jerk.
Alex is right. Fed and Gov (dem or repub) have no ability to produce or cause production (create wealth). Only cooperating individuals can do that (the “real” economy). Fed and Gov only have the power to plunder and destroy. A thug who shot his victim in the gut cannot heal the victim by putting down his gun.
“…there is every reason to expect that the GOP will be equally as opposed to any actions taken by the Federal Reserve that would make the economy better …”
I agree the GOP may oppose the FED if they believe it would be politically beneficial. However, the FED is incapable of performing any action that would make the economy better. Our financial plight is essentially caused by the FED’s allowing fractional reserve banking to create more fiat money than has ever been created in the past.
The consequences will be ugly. Even if the GOP were to abolish the FED, it is no more likely to abolish legal tender laws or institute a sound currency than the Democrats.
Hmmmm, Amerika does resemble the late USSR. In 1992, after the MMM Ponzi scheme crash, Soviets picketed the newly created Russian government requesting that the MMM head Mavrodi is released from prison hoping that he would have give their money back! The FED has being trying their best to worsen the structural problems of American economy. Yet, people still believe FED has a magical measures to really improve the things but evil GOP somehow prevents them from doing that
However, thanks to posting the speech by Dr. Paul. FED DOES steal money from poor and gives it to the rich. But it seems the captives of the Fed govt developed the Stockholm syndrome. Yeah right, they give us life just by not taking it.
Wow the comments are well thought out and articulat, and unlike the article itself it seems the commenters understand economics.
Ron Paul could care less if the GOP jumps in a lake. He actually knows about economics and has warned us all for many years. We did not want to hear it
Thank you Dr. Paul for your patriotic fight.
Articulate… lol ;)
“The Fed is, of course, an independent agency.”
The Fed is, of course, a private corporation and as such does not have to reveal who its shareholders are. They receive a guaranteed 6% return every year. After which, their “profits” go into the US Treasury. What a scam.
The Fed generates the “money” that the politicians use to buy votes to stay in power.
They won’t change this situation voluntarily.
This article is depressing.
Your implicit assumption that the Fed can “make the economy better” betrays the fact that you simply do not understand how our monetary system in this country works. Now you are trying to shift the blame for the mess that ALL politicians (with the exception of Paul who has been actively trying to explain this to people and Congress for years) have caused, to the GOP who will ride “economic hardship” to “election glory” and “virulently” criticize the Fed, keeping it from using its tools to fix the economy.
News flash: the Fed cannot and will not fix the economy. Nothing can fix the economy as long as the Fed has control of the money.
If you have any desire to actually understand what is going on right now, I suggest you start with a quick read by Murray Rothbard entitled “What Has Government Done To Our Money?” (available as a free PDF). For further reading on one proposed solution to the whole problem read deSoto’s “Money, Bank Credit and Economic Cycles” (PDF also available free).
You need to think outside the Fed box on this one because the problem is not with the D’s or the GOP, it is with the whole monetary system and cannot be fixed without fixing the whole system. I hope you can keep an open mind long enough to see this.
The Fed is not an “independent agency”, the Fed is a for profit. private bank. It is not a governmental agency in any way, shape or form.
And as such it needs a audit, something that has never been done to it in its 97 year history.