Making same mistakes
To the Editor,
David Kruse makes some good points about the current state of our economy. For instance, his characterization of the China Currency Bill as Smoot-Hawley-like is right on. It is widely believed today that Smoot-Hawley turned a downturn into a depression.
In calling most of the politicians idiots, Kruse again hits the nail on the head. The Republicans calling for more scrutiny of The Fed don’t really know what they are talking about. They just read polls and find Ron Paul has exposed The Fed for what it is. They jump on board for votes, not principle.
The only tool The Fed has to “fix” the economy is control of the money supply.
Controlling the price of money is really no different than Smoot-Hawley or any of the free trade agreements that have come down the pike.
They are all government interventions in a free market that could function well on its own; but exist as protections for the well-connected.
Money The Fed loans to big banks is then loaned down the line at higher interest. All that free money put into circulation from nowhere drives down the value of our savings the same way an increase of the supply of corn would drive down the price of corn.
The Fed is as politically insulated as it can be with the chairman appointed by the president and approved by congress.
The Fed has much incentive to create an illusion of prosperity to keep incumbents in office; and, in doing so, much investment was misdirected, causing the bubble that has now burst evidenced by excess productive capacity and unemployment.
Business cycles are caused by central banks making bad guesses in their effort to manage an economy too large and complex to be managed by anything but a true free market.
We would be better off with a gold-based currency and interest rates based on demand for money versus money available for loans.
Ben Bernanke is doing the same thing as Hoover and Franklin Roosevelt did to turn a recession into a 16-year depression.
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