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Gesture politics: We the People vs. the Fed

One of many subjects I didn't learn enough about during my journey through public school, is about that now front-page-news bureaucracy, the Federal Reserve System.

The FRS was relatively obscure years ago and we were duly taught its raison d'etre, which-in language from the Constitution's Article 1 Section 8-requires the Congress to "...Coin money, regulate the value thereof..." and so on-a task which the legislative branch.

Think about the continentals issued during the Revolution or the greenbacks issued during the Civil War. Both caused major inflation. The first were never redeemed and the second were redeemed (but in ways that were part of the reason for the 30-year-long period of post-Civil War deflation).

But those easy one-task days ended in 1978. Then, under Humphrey-Hawkins, Uncle Sam's workload was at least doubled: it now included, under "monetary policy", long-term growth as well as the original price stability also labeled "inflation control".

Humphrey-Hawkins has additional goals, not for the fed but for government: primarily "full employment", "increasing production", and "balanced trade" objectives.

You already know their "success" regarding the first (full employment), which has subsequently been construed to be a collateral fed task; or at the last (balanced trade), which in plain English means action by the legislative branch to prevent overseas balance-of-payments deficits. It just didn't happen.

Given its historical economics performance record, it's understandable that Congress wouldn't want to take another try at its constitutionally assigned job any time soon.

Those in the legislative branch could never agree on a Bank of the United States, but eventually issued temporary licenses for a first and then a second bank, both as private parties with a side ticket to do public business. Each license expired after 20 years.

Thus, from 1789 to 1913, private banks coined money (actually, issued paper bank notes as well as specie coinage); there were ups and downs in inflation and deflation, but the overall record was one of a 12 percent purchasing power decline during efforts to regulate the value of American money.

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