The Federal
Reserve Bank’s Conceit
In its efforts to control the economy, the Federal Reserve Bank keeps failing.
To
fund long-term investments, companies often borrow the money
with long-term
bonds. Whoever owns a bond when an interest payment is made
receives the
interest. Whoever’s the owner at maturity receives the principal
payment. The
bonds can be bought and sold all along.
The
prices of long-term bonds are the most important prices in the
entire economy. They
should be set by supply and demand. They are not. Indirectly,
they’re controlled
by the Federal Reserve Bank.
Government
price controls are always harmful. In its conceit, the Fed picks
the most
important price to control. No one knows how many economic
disruptions result.
Business
leaders are more willing to make long-term investments when
they’re assured
that the dollar’s value will remain level. In 1913, when the Federal Reserve was created, an
item bought for $1.00 would cost $25.46 today. How’s that
for monetary
stability?
The Fed’s wild
fluctuations of the U.S.
money supply and its manipulations of foreign currencies
increase economic
volatility. The
Fed’s top-down planning has caused serious economic downturns
that would not have
occurred had the government simply imposed a gold standard to
preserve the value
of the dollar. Economies work better when they’re self-guided,
not by
government, but by personal liberty, supply and demand, free
pricing, competition,
and a level value of the currency.
The
Federal Reserve Bank and the federal government itself are
responsible for numerous
economic downturns. The citizens hurt most are the poor.
