Most people really don’t understand the role that monetary policy has on their life. Unlike with Congress who has elected officials that control America’s fiscal policy … the Federal Reserve is a quasi-privately owned bank. No one knows who owns it … and I’m not kidding about that. And while I understand the importance of an impartial, apolitical monetary policy … I also understand that the Federal Reserve isn’t doing it’s job right.
Now – there are those in the Ron Paul super fan club that espouse the elimination of the FED (which you could do if you just handed the reigns over to the Treasury); those fans would also like to see a return to the Gold standard which is as directly responsible for the Great Depression as many other factors. This country has had FIVE Depressions in it’s history … only one of those has occurred with the Federal Reserve in place.
- The Depression of 1807 lasted till 1810 … 3 years
- The 1815–21 depression lasted … you guessed it – 6 years
- The Long Depression lasted from 1873 to 1896 … that’s 23 years
- The Depression of 1920 – 1921 lasted for 18 months
- The Great Depression lasted from 1929 to 1939 – 10 years.
The FED has proven to be imperfect but it must act in order to prove it’s relevance. And despite the fact that the FED could be doing more … should be doing more since a “Do Nothing Congress” has decided to sit on it’s hands in a time of economic frailty in order to win in the game of politics … the FED isn’t acting.
Krugman writes HERE:
Why won’t the Fed act? My guess is that it’s intimidated by those Congressional Republicans, that it’s afraid to do anything that might be seen as providing political aid to President Obama, that is, anything that might help the economy. Maybe there’s some other explanation, but the fact is that the Fed, like the European Central Bank, like the U.S. Congress, like the government of Germany, has decided that avoiding economic disaster is somebody else’s responsibility.
None of this should be happening. As in 1931, Western nations have the resources they need to avoid catastrophe, and indeed to restore prosperity — and we have the added advantage of knowing much more than our great-grandparents did about how depressions happen and how to end them. But knowledge and resources do no good if those who possess them refuse to use them.
And you can actually watch Ron Paul and Paul Krugman debate monetary policy and the role of the FED HERE.
