The
Federal Reserve Bank, with its 700 PhD economists, should
stop trying to predict the future. They’ve often been wrong, especially about
major economic changes. The biggest decline of a generation started in 2008.
The Fed didn’t see it coming and in fact partly caused it.
Advanced computers made almost all central
banks think they could forecast the future. Most have failed, resulting in excessive
debts and inflation worldwide.
America should adopt a gold standard,
meaning the nation would define its money as a fixed weight of gold. Citizens could
exchange currency for gold or vice versa. Gold would move across national
borders, going where interest rates and business opportunities beckon. The
central bank, making no predictions and setting no interest rates, would let
the economy take care of itself, simply assuring the currency’s convertibility to
gold at the statutory price. The result: faster economic growth and less
economic volatility, helping the poor most.
Those 700 PhD economists could adopt new
careers and do something useful for a change.
The
U.S. Treasury currently pays interest on the $22
trillion national debt at a low rate: 1.8 percent. The interest payments this
year total $389 billion. Full-time U.S. workers number about 132 million. The $389
billion payments represent almost $3,000 for each one.
If and when the interest rates eventually double
or triple, the interest payments will amount to . . . well, real money.
And if the debt itself continues to rise?
But of course there’s no chance of that.
