CONGRESS’S INTEREST IN MONETARY POLICY
I have for years sensed a total disinterest in monetary policy by members of Congress as well as members of the Financial Services Committee. An incident confirmed this skepticism. After I had brought up the subject of gold in a Financial Services hearing, in all seriousness, a member asked me in private whether the dollar was “backed” by gold, having up until then assumed that it was. I don’t think this is unusual. Many of the people who are supposedly in charge of monitoring the system are surprisingly ignorant about even the most basic aspects of how the system works. There has been little understanding of any economic policy in Washington. The idea that the government and the Fed should be completely out of the business of central economic planning is not even seen as worthy of discussion. And yet it is Congress that is put in an oversight role. It should exercise that role. But that means doing the work necessary to learn about the topic, and not merely deferring to the big shots in charge of the bureaucracies Congress supposedly oversees. Most members of Congress are not automatically hostile to gold or even to the abolition of the Fed. Their attitude is more one of surprise that anybody would even consider it. At the same time, I’ve never heard a member express support for paper money on grounds that it facilitates the expansion of the state. Most don’t see the connection at all. They aren’t even curious about the topic. What the Fed and paper money have done for Congress is lead legislators to believe that there are no limits on what they can spend, on what they can propose, and what they can accomplish. They really do behave like college students on spring break who are using their parents’ credit cards with no limit. They don’t think about the money. They don’t think about who or what is paying the bills. The ability to do what they want is just taken for granted. They aren’t even interested in looking at the accounting books. But they would hit the roof if the card were ever declined. The point is, unless one has a strong love of liberty, ignorance regarding money is not something that most members of Congress regret. This ignorance is what allows conservatives and liberals alike to spend, borrow, tax, and inflate to finance their various programs, both foreign and domestic. There is also the serious matter of the manner in which the Fed intervenes in politics, not just every once in a while but constantly. A famous example of this took place when Arthur Burns was chairman of the Fed (1970–1978). He tightened up on secrecy during his reign and ended the practice of keeping verbatim minutes during Federal Open Market Committee meetings. His intervention in politics is indisputable. Following the election of Jimmy Carter in 1976, he dearly wanted to be reappointed. He cut the discount rate and accelerated money growth. True, he was a Republican, but he wanted to go down in history as bipartisan. A memo from a staff aide, reported by William Greider, informed Burns that “Carter can be seduced… reappointment would make Carter out to be a high-minded statesman…. Carter will have to be assured that, if you are reappointed, you will not continue to publicly criticize everything that is near and dear to him.” 1 Sadly for Burns, the courtship failed. Even more sadly for the country, the courtship wrecked the dollar further. It also wrecked the Carter presidency, as he dealt with the worst bout of price inflation in more than a century. Finally, the inflation backfired even against the Democrats and brought Ronald Reagan to power. Such is the lagging effect of shortsighted efforts to manipulate the political environment to benefit particular Fed governors and banking interests. Despite his sympathy for the gold standard, Reagan did nothing about the issue. His advisers successfully kept him quiet on this issue, fearing that he would be seen as crazy or kooky. Similarly, many people in Congress were privately sympathetic but not knowledgeable enough to take up the cause. In the meantime, the Fed’s involvement in the “political business cycle” is a well-documented fact. The Fed tends to loosen before elections and is far more likely to tolerate downturns between presidential elections and Fed appointments. This is an open secret in Washington. We all pretend that the Fed is not a political operation, and yet everyone knows that it is among the most political institutions in the entire government. As the years rolled on, it became more apparent to me that the leadership for a return to sound money would never come from the U.S. Congress. Of course, Congress could abolish the Fed tomorrow if it wanted to. The representatives’ ignorance of economics, as well as the benefits they enjoy from irresponsible spending, prevent this. Our leaders will only respond when the people of this country rise up and demand honesty in money. Of course, not every supporter of the Fed is somehow a participant in a conspiracy to control the world. Everyone who wants to control the world, however, whether for the benefits of gaining wealth or power, must have control of the monetary system. It’s been that way throughout history. The greater the degree of freedom the people enjoy, the sounder has been the money. Tyranny always goes hand in hand with government’s wrecking of the money system. The problem is not only a lust for power; ironically, benevolence and humanitarianism drive many to seek power over others. They believe for humanitarian reasons that the strong and wise have an obligation to subject the weak and ignorant to the whims of government control. As they gain more influence and power, they become more convinced that they are saviors of mankind, and if any resistance or obstacles appear that limit their power, they believe that brute force must be used to impose their “goodwill” on the stubborn few. The purpose of freedom vanishes from their minds. The French Jacobins in the eighteenth century were so convinced that their cause was right that even using the guillotine to enforce their will on others for their alleged own good was legitimate. Some who promoted the Iraq War were motivated in the same manner. They rationalized a humanitarian excuse for the war even as more than 4,000 Americans died and tens of thousands were wounded. The one million Iraqis who died, and hundreds of thousands who were injured, and the millions of refugees were all justified because of the “goodness” the instigators of the war brought to the world. No matter the true reason for wanting to control others, the tax and borrowing system never suffices. Control of money by government and central banking is always required. As long as there is wealth available, the people will not complain about the takeover of the monetary system. The day the Fed came into being in 1913 may have been the beginning of the end, but the powers it obtained and the mischief it caused took a long time to become a serious issue and a concern for average Americans.