Tuesday, January 31, 2012

The FOMC: There they go again

The other day Mitt Romney took a respite from blasting Newt Gingrich (although Newt did no such thing) and concentrated on Obama in a speech in the Villages. Romney actually said that he would work to repeal everything done by Obama. He attacked Obama for cutting military spending, trying to emulate Europe, for health care, Dodd-Frank and all the rest. He promised to rein in the EPA. What he left out was the Federal Reserve. In 2010 he supported the reappointment of Ben Bernanke to be Fed Chairman. In 2011 he had changed his mind. Lets hope that if he becomes president he remembers that and does not reappoint Bernanke - perhaps Bush's most disastrous appointment. Like the sainted Anna Jacobson Schwartz said (Friedman's coauthor of the Monetary History of the United States), Bernanke is not up to the task. The Fed's recent vote in the Open Market Committee to hold the fed funds rate near zero is instructive. Demonstrating that the Fed is stubborn and has not learned its lesson the vote was 9-1. I would have thought that by now there would be more dissent on the FOMC but apparently not. The fed needs to be shaken up but not blown up (sorry Ron Paul). Romney has stated in 2011 about whether he would now reappoint Bernanke and he said "No, I'd be looking for somebody new. I'm -- I think Ben Bernanke has -- has over-inflated the amount of currency that he's created." Amen to that. Since Bernanke seems intent to keep destroying the US currency by financing Obama's policies and the FOMC has yet to go a set and just say no, then it is time for Bernanke to go back to Princeton. Lastly. although Ron Paul wants to blow up the Fed and I have often written that he is mistaken because the management of the money supply is too important to be managed by either the president or certainly the congress. At least Romney recognizes this when he says that he would not agree with ending the Federal Reserve and he did not trust Congress with managing the responsibilities of the Fed. The fed structure is intended to isolate it from politics. The only thing wrong with this fed is who is leading it. Maybe next time the next president will give us a secretary of the Treasury not from Wall Street and a fed chairman who is not from the ivy league.

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