Thursday, March 19, 2009

Why the Fed sucks

Headline from The Wall Street Journal: Fed in Buy-Bond Binge to Spur Growth. The first sentence: The Federal Reserve announces it will buy hundreds of billions of U.S. securities and other mortgage-backed securities. I have a question for Ben Bernanke: On what do authority do you do this? The Constitution says: "All bills for raising Revenue shall originate in the House of Representatives" (Article I, section 7). There is no clause saying "Except when the Fed determines it's a good idea." When did a constitutional republic become a banking oligrachy?

Even if you don't care about the Constitution, you should care about inflation. The Fed overall has added 1.5 trillion into the economy to (allegedly) solve our economic crisis. When you add this sum to the two wars we're in, the "stimulus" bill, and the already massive deficit, you've got a recipe for runaway inflation. Nothing good–I say this with certainity—can come out of massive inflation. I hasten to note it didn't work well in Germany in the 1920s.

Do I have a solution to this crisis? Yes, it's simple: stop spending money that we don't have. Crazy, but it just might work. And let's abolish the Fed before it bankrupts us.