John Stossel: End the Federal Reserve
I've always avoided reporting on the Federal Reserve. I know it's more important than much of the stuff I cover, but it's so boring. How can I succeed on TV reporting on the Fed? Fed chairs even work at being dull.
Alan Greenspan said he tried to be obscure because he didn't want to spook markets. He called his obfuscation "Fedspeak." It's a far cry from the clarity of his language — and principles — when he was young and a disciple of libertarian Ayn Rand.
Outgoing Fed Chairman Ben Bernanke and his likely successor, Janet Yellen, are almost as boring.
But we should watch what they do. The Fed can destroy your savings and your future. The current crew of Fed bureaucrats has raised the Fed's balance sheet to a stunning $4 trillion.
As Sen. Rand Paul's father, retired congressman Ron Paul, put it, "No secret cabal of government officials should have the authority to create money out of thin air."
He makes a good point. For three decades, Ron Paul was virtually alone among politicians in questioning the Fed. But now there are more.
Jim Bruce's documentary "Money for Nothing" is a great beginner's guide to the Fed. Bruce points out that the last two Fed chairmen, appointed by both Republicans and Democrats, have quietly increased central planning of our economy. Government now controls more of our economy than ever before. This is not a good thing.
The Fed was created to prevent bank runs. It would be a lender of last resort and create stability.
Yet 16 years after the Fed's creation, the Fed's low interest rates fueled the Roaring Twenties and led to the greatest stock market crash in history. Then the Fed's tight money worsened the Depression.
I'm told they learned from their mistakes. For four decades after that, the Fed usually kept increases in the size of the money supply gradual, steady and predictable. Except for one nasty period, inflation has been kept in check.
But now the Fed is charged with two sometimes clashing missions: preserving a stable currency and reducing unemployment.
There's great pressure for the Fed to time these decisions just right in order to avoid economic downturns and — some argue — to make current political officeholders look good. Increasingly, investors and Wall Street analysts obsess over what the Fed will do, instead of paying attention to inventions, productivity and real wealth-creation.
The Fed, created to shore up capitalism, has become an instrument of government economic management not so different from a socialist planning board: a tiny handful of powerful people attempt to fine-tune the entire economy. Its main mission has become continually goosing economic activity through infusions of new cash to maintain the illusion that good times will never falter.
The result isn't stability, but one economic bubble after another.
The Fed's manipulations fit well with President Obama's "stimulus spending" efforts. But neither seems to do the trick. This post-recession "recovery" is among the weakest ever. Japan's central bank tried the same stimulus for the past 15 years, since its economic crash. That didn't work either.
Instead of following Japan's example, we should learn from Canada. The Canadians had no central bank when the Great Depression began, just private banks issuing currency backed by gold. During the 1930s, not even one Canadian bank failed. Thousands failed in the U.S.
The massive bank bailouts a few years ago — taxpayer money showered on the richest institutions that have ever existed — are based on the assumption that those banks are "too big to fail."
It would be more accurate to say that those banks and the Federal Reserve that dominates them are too big and too powerful, so much so that they risk dragging us all down with them if they fail. No dozen people should be granted so much power.
John Stossel is host of "Stossel" on the Fox Business Network, and the author of "No They Can't! Why Government Fails, but Individuals Succeed."