Saturday, April 25, 2009

Federal Reserve

To whom it may concern,

Nearly a century ago, after several failed starts, the United States created a Federal Reserve system. This is the same reserve system that is in place today. As the Federal Reserve takes an increasingly larger role in our economic recovery, several questions and concerns begin to arise. For instance, who actually owns the Federal Reserve? While the name would imply that it is a government entity, it is, in fact, a combination of a central bank, several regional banks, private banks, and other policy setting committees. The Federal Reserve is very much a quasi-public entity. A central component of its purpose is to maintain an elastic currency that both expands and contracts as is warranted by economic conditions. The Federal Reserve has not contracted the supply of money since the Great Depression. In this Great Recession, will the Federal Reserve implement this elastic currency to contract the supply of money? Since it can essentially issue debt without consequence in order to stimulate the economy by expanding the supply of money and credit, the Federal Reserve can print its way out of this recession. Yet the costs of these actions are unclear. If the Federal Reserve regulates monetary policy, then who regulates the Federal Reserve? There are no checks and balances for this quasi-public, independent institution. If the supply of money is virtually endless and not tied to any gold standard, what value does our currency really have (i.e. is it not just monopoly money then?)? And if it is just monopoly money, then why do we insist on perpetuating capitalism and not seek an alternative system?

GUNNAR HAND, AICP

1 comment:

  1. I think this is the most important issue effecting america today. The federal reserve is uncontitutional. Since it's inception our currency has devalued approx. 93%. We do not reward private institutions who are corrupt and have poor buisness practices, with contracts and unlimited resources. oh wait, yes we do.

    ReplyDelete