Dear Reader,
Mr. Jason Trennert, he of Strategas Research Partners:
- Forcefully keeping interest rates low from 2008 through 2021 led to a variety of economic sins and unintended consequences, not the least of which was that the average guy with a savings account received no compensation for his deposits for more than a decade while those wealthy enough to have leveraged investments like private equity reaped untold riches.
- In what must be seen as a supreme irony that members of the Fed have been loath to admit, such policies unintentionally led to the rise of populism that gave birth to Donald Trump’s extraordinary political career.
Irony? There is irony itself.
The very blunderbusses who hold Trump in highest contempt… themselves catapulted him to highest office.
Their backfiring policies put him there.
Imagine a fire house on fire. Imagine a thirsty man adrift on an ocean.
Imagine a headshrinker upon the couch, his own head getting shrunk.
Now you have the flavor of it.
We Just Need to Reform the Fed, That’s All
The author nonetheless sobs that many influential people— including Elon Musk evidently — aspire to “End the Fed.”
This Trennert fellow concedes the Federal Reserve has been seized by the messianic impulse.
He laments its “desire to solve all the world’s problems — from social justice to climate change.”
Yet he does not seek its murder.
He prefers instead to tame it, to domesticate it, to check it… to take in its luffing sails a bit.
In brief, to reform it:
“#EndtheFed may be politically popular in some quarters but would be bad policy. “
Would it? I am far from convinced that it would.
The Failure of Reform
“We need to reform the Federal Reserve.”
How many times have you heard it said? If once, then nine million.
We are told this should be done or that should be done.
We are told this will make the Federal Reserve more efficient, that that will make the Federal Reserve more transparent.
And perhaps — in certain circumstances — it would.
Yet I take a dim, dim view of most “reform.” The reason is simpler than Sam and clearer than gin.
Reform is an ax that rarely strikes the root.
Cleaning up the Whorehouse While Keeping the Business Intact
Reform is designed specifically to deliver but a glancing blow — to leave the root largely unmolested.
That is because too many interested parties draw sap from the root. It is the very source of their prosperity.
Authentic reform would shatter the root — and the sustenance it offers a selected few.
H.L.Mencken labeled reform “mainly a conspiracy of prehensile charlatans to mulct the American taxpayer.”
I believe he struck bullseye. Under most reform the American taxpayer endures a fleecing.
The late libertarian Frank Chodorov said most reform aspires to “clean up the whorehouse [while] keeping the business intact.”
For a more fitting analogy I seek in vain. I file only this lone caveat:
The whorehouse — for all its sin — at least does an honest trade.
At Least the John Is a Satisfied Customer
A fellow emerges from this den of carnality somewhat lighter in the wallet, it is true.
Yet he also emerges somewhat lighter in spirits. He has gotten value for money.
Can the same be said for the Federal Reserve? The Federal Reserve that reduces his dollar to sawdust… as a termite reduces wood to sawdust?
The same cannot be said. Its very business is false.
The Federal Reserve manipulates interest rates that send false signals to markets.
It inflates bubble after bubble. What is a bubble but a monstrous falsehood?
It cannot even define the dollar. And if it cannot tell you what a dollar is… how can you expect it to cherish it or guard it?
Yet “reformers” accept the Federal Reserve’s central monetary role.
That role is the distortion and manipulation of interest rates. They believe superior economic performance requires it.
To these reformers it is a fact as elemental as gravity… or the ebbing and flowing of the tides… or the imbecility of a congressman of the United States.
Eliminating that role is the one reform they will not consider.
True Reform
Is it true reform you seek? In the spirit of benevolence so characteristic of me… here I propose my own modest reform in seven simple words:
“The Federal Reserve Act is hereby repealed.”
That is, reform the entire business off Earth’s despairing and suffering face.
No more setting, influencing or in any way bullying short-term interest rates, long-term interest rates, intermediate interest rates or any other interest rates.
Let the United States economy find its own level — high, low, all grades between them.
Turn the credit business over to borrowers and lenders on the free market… as the prices of automobiles, computers, chewing gum, floor mops and catcher’s mitts are turned over to the free market.
Let the devil take the hindmost.
Winners and Losers
Will there be losers? Alas, there will be losers. Yet does not the current arrangement yield its losers?
There will also be winners. Among them will be many of today’s losers.
These are those who wallow and languish beneath the present arrangement — the ones who elected President Trump.
Most importantly, my proposal would wring the wild excesses from the financial system.
It is true, the booms would not thunder nearly as loudly… or for nearly as long.
Yet nor would the busts. A general stability would prevail.
And the stable boat is preferable to the rocking boat.
Thus you have my simple proposal of reform. I offer it today in the highest spirit of public service.
A More Modest Proposal
You say my reform is less reform than demolition — that my implement of reform is a wrecking ball rather than a chisel.
You are in fact correct. And I concede it at once: very few would agree to it.
It is far too radical. And I have no expectation of its adoption.
Let me then propose a reform far more modest:
- Restore the Federal Reserve’s original purpose of providing liquidity to otherwise solvent banks in event of financial crisis.
- Strike from its statute the twin mandates of “price stability” and “full employment.”
There you have a reasonable reform… to my liver and lights at least.
Moderate Reform Is Better Than No Reform
My proposed reform would reduce the Federal Reserve’s workload. It would lift much of the burden from its drooping shoulders.
Social justice and climate change would range beyond its care.
Most vitally: the Federal Reserve would work far less mischief in this world — if implemented.
This reform, incidentally, is within the lawful power of the Congress of the United States.
Yet will even this modest reform be implemented?
Gleefully, the answer is yes.
You will have it come the third Wednesday of the 11th month following the 388th blue moon following Christ’s return to Earth.
On that high and glorious day I shall rejoice.
Regards,
Brian Maher
for Freedom Financial News
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