Higgs hits back at Bernanke on Fed audit

December 2nd, 2009 4:33 pm  |  by  |  Published in Bailouts, Banking, Big Government, Commentary, Debt, Economics, Federal Reserve, Robert Higgs  |  0

This is a few days old, but it is so worth your time if you missed it. Robert Higgs dresses down Bernanke’s arguments against the Ron Paul audit effort in classic Higgs fashion.

And about this “economic and financial stability in the United States” that a Fed audit would threaten: Is Bernanke thinking about the stability we enjoyed between the world wars, when the Fed managed to bring about the onset on what proved to be the greatest depression in world history (an accomplishment for which he has previously accepted responsibility on behalf of the Fed)? Or perhaps he is thinking instead about the stability we enjoyed since 2001, when the Fed pushed the Fed funds rate quickly from 6.5 percent to 1 percent, held it at a negative real rate for several years, then pushed it up quickly to 5.25 percent in 2006-2007, then shoved it down quickly to almost zero in the past year? Zounds. It would certainly be tragic if the American people had to give up such remarkable stability. Or perhaps he is thinking about the fact that before the Fed was created, the dollar had retained its purchasing power more or less constant for more than a century, except for transitory war-related ups and downs, but since the Fed’s creation, the dollar has lost more than 95 percent of its purchasing power. Who calls this degree of debasement stability? Yes, it’s more stable than Zimbabwe’s currency. Bravo, Fed: you’ve yet to generate hyperinflation. But you may still do so before the present mess is completely washed away.

Let’s get serious. If the Fed is known for anything historically, it is for first pushing the monetary accelerator to the floor, then stomping on the monetary brake. To praise this outfit for its contribution to financial and economic stability is akin to praising Josef Stalin for his commitment to human rights.

Read the entire piece at The Independent Institute.

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