The refrain on the Hill in response to the idea of making Federal Reserve operations more transparent is that we shouldn't "undermine the independence" of the Fed. Others argue that the Fed is "private," thus unaccountable, and the Congress should take control of our monetary affairs. There are germs of truth and germs of error on "all" sides represented on the Hill.
My refrain to the argument against "undermining Fed independence" is that this argument implies that the Fed's independence hasn't already been undermined. By that, I mean that - if one can see the big picture - the Fed is the government's central bank, empowered by the government, with the purpose of funding excessive government expenditures. That is the germ of error in that argument.
The germ of truth to the first argument, which is also the germ of error in the second argument, is that we would be no better off with Barney Frank, or the Treasury, setting interest rates. The problem is not that the Fed is a private central bank.
Thus I have came up with two modest proposals which we should have no problem passing, if politicians are serious about maintaning the Fed's so-called independence. My proposals would help create a wall of separation between the Fed and the government. Separation of bank and state.
I say Congress passes a law prohibiting the Fed from monetizing U.S. Treasuries. Let's outlaw the Fed from being able to buy T-bills, T-notes, and T-bonds. Compel the Fed to sell off all of its Treasury holdings. Let the Fed push up interest rates. For some reason, I doubt the biggest sub-prime borrower of all, i.e., the U.S. Congress, would support this.
I say that Congress repeal legal tender laws, which mandate the use of Federal Reserve Notes to settle all debts. Let the free market create wildcat banks, which use gold and silver bullion as money.
If the Fed is truly "independent" from the government, and if the Congress wants to maintain this "independence," then these two proposals should fly through the Congress. These proposals are merely designed to make the Fed more "independent" from the government, i.e., a truly private/free market, non-government connected institution.
Mark served honorably for four years on active duty in the Marine Corps infantry, and was a Libertarian endorsed candidate for a municipal office in 2002. He has held the NFA Series 3 license (commodity futures and futures options broker) which he did a voluntary withdrawal on so that he can trade futures for his personal account. Since the year 2000, he has spent much of his free time reading the great minds of the Austrian School of economics, such as Murray Rothbard, Henry Hazlitt, Ludwig von Mises, et al.
Cover
•
Commentary
•
Books & Reviews
•
Climate Change
•
Site Links
•
Feedback
Mark served honorably for four years on active duty in the Marine Corps infantry, and was a Libertarian endorsed candidate for a municipal office in 2002. He has held the NFA Series 3 license (commodity futures and futures options broker) which he did a voluntary withdrawal on so that he can trade futures for his personal account. Since the year 2000, he has spent much of his free time reading the great minds of the Austrian School of economics, such as Murray Rothbard, Henry Hazlitt, Ludwig von Mises, et al.