With so much blame going around for the current financial crisis it is surprising that so few in the mainstream press have discussed the role of the Federal Reserve System. For too long the Federal Reserve has operated behind a shroud of mystery—as Senator I would make sure that all Americans understand the dangers of unsound monetary policy and shed light on this secretive organization.
Established in 1913 by an act of Congress the Federal Reserve System controls the nation’s money supply and influences interest rates throughout the entire country. They essentially have the power to create money out of thin air—with a virtual blank checkbook its not surprising that so few in Washington are willing to question the Fed.
When the Fed lowers interest rates by creating more money, not only does it devalue the money you currently have in your pocket, but it also leads to the boom-bust cycle. The Fed misleads investors into embarking on projects that make no long-term sense. Our current housing bubble was a direct result of the Fed’s decision to keep interest rates artificially lower than the market could sustain. The Fed basically spiked the punch and is now acting surprised that the party got out of hand.
While this explanation for the booms and busts is popular among economists, including Nobel-prize winner F.A. Hayek, few in the mainstream media are willing to question the Fed.
Thankfully H.R. 1207, the Federal Reserve Transparency Act, has gathered a great deal of momentum with over 160 co-sponsors. This Act will make it possible to audit an institution that has created trillions of new dollars in the past few months. The American people have a right to know to whom this money was given. For all its talk of transparency the current administration has done nothing to tear the shroud off of the Fed.
Given this incredible power given to a semi-private institution, one wonders why we don’t hear more about the Fed and its actions from the Congress. As Senator I would make sure that the Federal Reserve is held accountable and restore transparency to our monetary system.