Game Changer: House Confronts Fed Chair Janet Yellen

Federal Reserve Chair Janet Yellen (photo credit: Day Donaldson via Flickr, CC BY 2.0)

On Thursday, Nov. 19, the Paul Ryan House took its most impressive step yet in advancing Speaker Ryan’s (R-Wis.) promised transformation of our political culture.  Ryan, in accepting the gavel, declared,

“Here’s the problem. They’re working hard. They’re paying a lot. They are trying to do right by their families. And they are going nowhere fast. They never get a raise. They never get a break. But the bills keep piling up—and the taxes and the debt. They are working harder than ever to get ahead. Yet they are falling further behind. And they feel robbed—cheated of their birthright. They are not asking for any favors. They just want a fair chance. And they are losing faith that they will ever get it. …

“What a relief to them it would be if we finally got our act together—what a weight off their shoulders. How reassuring it would be if we actually … grew our economy, … lifted people out of poverty, and paid down the debt. At this point, nothing could be more inspiring than a job well done. Nothing could stir the heart more than real, concrete results.”

Ryan is losing no time in taking bold steps. With the instrumental support of Leader Kevin McCarthy (R-Calif.), leadership brought up for a floor vote — and passed — possibly the most crucial piece of economic growth legislation in many years: Huizenga-Garrett’s FORM, the Federal Reserve Oversight and Modernization Act of 2015.

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House Passes Historic Legislation Exercising Authority Over Federal Reserve

U.S. Capitol Building — East steps

In a historic vote this morning of 241-185, the House of Representatives passed H.R. 3189, the Federal Oversight Reform and Modernization Act.

The FORM Act — very much including Chairman Kevin Brady’s (R-Texas) Centennial Monetary Commission legislation — is the most important legislation to pass the House addressing the Fed’s performance since the Humphrey-Hawkins Act of 1978, almost forty years ago. The passage of this legislation is historic.

The American economy has been stagnant now for 15 years. Many believe that the booms, busts, the panic of 2008, the Great Recession, and the sluggish recovery were caused in major part by bad Federal Reserve monetary policy. Congress should be applauded for exercising its constitutional authority in this area. The Freedom Caucus should give Speaker Ryan a standing ovation.

Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles Project’s Senior Advisor, Economics. Continue Reading

Ted Cruz Hits a Grand Slam: The Dollar Should Be “Ideally Tied to Gold”

Financial reporter Rick Santelli — who triggered the Tea Party movement — put a profound question to Sens. Ted Cruz and Rand Paul in the CNBC presidential economic debate. Santelli’s key question was about the impact of the Fed on job creation and economic growth.

His question and the answers were a highlight of a very fine, informative debate.

Sen. Cruz hit a grand slam:

Senator Cruz, in his answer, featured his original co-sponsorship of Audit the Fed. Even more impressively, Cruz featured his original co-sponsorship of the Centennial Monetary Commission, a crucially important piece of legislation to restore high integrity monetary policy.

Then … Sen. Cruz upped the ante with an unprompted observation that the dollar should be “ideally tied to gold.”  “Ideally” is exactly right.

The American Principles Project has long been at the forefront of advocating defining the dollar as a fixed weight of gold, legally convertible thereto, as fundamental to restoring equitable prosperity: sizzling job creation and economic growth for workers at least as much, perhaps even more, than for business.

The gold standard was advocated by the iconic Rep. Jack Kemp — the quarterback behind Reaganomics with its dramatic growth in jobs and the economy, especially for workers, and later HUD Secretary and Republican Vice Presidential nominee.

Kemp — closely advised by APP’s policy director Jeff Bell, among others — was the key figure of our era in restoring America’s economic growth.  Kemp’s gold standard — of which Bell was an essential advocate — remains the most important unfulfilled part of Jack Kemp’s “Unfinished Symphony.”  The gold standard means growth. Continue Reading

“It’s The Economy, Stupid!” Time For CNBC To Grill Candidates On Monetary, Tax, Trade Policy

Photo credit: Teresa via Flickr (CC BY-ND 2.0)

At last, we mere voters might get to watch a debate that will focus on the two top issues that virtually every poll places at the top of our concerns: jobs and the economy.  Earlier debates have only lightly brushed on these matters. This is a great pity. Time for CNBC to give us a gold standard presidential debate with questions that matter.

As I wrote in my Forbes.com column “Here’s What’s Likely To Hurt the Republicans in 2016” last April:

“It’s the economy, stupid!”  The weirdest thing about the onrushing 2016 presidential cycle is the scarcity of a GOP economic growth theme. Missing, too, is a serious growth agenda. That gap — not demographics, nor electoral college math — is the GOP’s most serious deficiency in its quest to regain the White House.

Democratic campaign consultant Bob Shrum wrote in his compelling political memoir No Excuses:

“Carville was obsessed with keeping the Clinton Campaign on message. That was easier with the ads than the candidate. A pledge to “end welfare as we know it” reassured voters in the middle. The point of the lance was economic: Clinton had an economic plan, a health care plan; Bush didn’t and you couldn’t trust what he said anyway. But it was hard to channel a candidate who was a policy prodigy. Clinton’s broad reading and interests sometimes led him to break out of the message box of his own campaign. I was on the phone with Carville one day when he said he had to hang up; the road was calling in.

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High Praise for Rand Paul’s Challenge of Ben Bernanke to Debate

Sen. Rand Paul (R-KY) (photo credit: Gage Skidmore)

The Libertarian Republic has this to say about Senator and presidential candidate Rand Paul’s recent challenge of Ben Bernanke to debate:

Ben Bernanke, who recently called Senator Rand Paul and those like him “know-nothings” because they wish to audit the Federal Reserve and question the central bank’s manipulation of the price of money.

So let’s get this straight: seek more information, transparency, and discourse from one of the most powerful and privileged institutions in the world and you will be called ignorant and unwilling to learn.

It appears the former Federal Reserve Chairman prefers condescension over open debate. Who would have thought the former leader of a monopoly institution would think in such a way.

Dr. Bernanke may (or may not) have been alluding to the infamous and short-lived anti-Catholic “Know Nothing Movement” of the 19th century. Yet there is a distinguished pedigree to knowing nothing: that of Socrates of Athens. As recorded by Plato, in The Apology, Socrates said:

Well, Chaerephon … went to Delphi and boldly asked the oracle to tell him whether … there was anyone wiser than I was, and the Pythian prophetess answered that there was no man wiser. Chaerephon is dead himself, but his brother, who is in court, will confirm the truth of this story.

[…]

When I heard the answer, I said to myself, What can the god mean? and what is the interpretation of this riddle? for I know that I have no wisdom, small or great.

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Ben Carson Links Debt to Monetary Policy

Dr. Ben Carson (photo credit: Gage Skidmore)

Dr. Ben Carson was interviewed on the economy last week by Marketplace host Kai Ryssdal.  Carson talked about America’s debt and made an important connection between the growth of the deficit and our abandonment of good money:

Now the only reason that we can sustain that kind of debt is because of our artificial ability to print money, to create what we think is wealth, but it is not wealth, because it’s based upon our faith and credit. You know, we decoupled it from the domestic gold standard in 1933, and from the international gold standard in 1971, and since that time, it’s not based on anything. Why would we be continuing to do that?

Republicans love to talk about the national debt, but Ben Carson has made an inspired leap by pointing out that creating more money doesn’t automatically create more wealth.  The Federal Reserve has been able to artificially sustain our borrowing with a loose monetary policy, but the cost in America’s wealth has been staggering.  If Carson continues down this line of reasoning, he might just find an economic message that resonates with the base and sets America on a path to equitable prosperity.

But at a minimum, given the spectacular failure of the Fed’s attempts to encourage robust economic growth, we could use a Centennial Monetary Commission to determine what would work better than our present broken monetary system.

Nick Arnold is a researcher for American Principles In Action. Continue Reading

Negative Interest Rates? Is the Fed Delusional?

The latest jobs report is lackluster — just 142,000 jobs were added to the economy in September. The labor force participation rate is now down to its lowest level since Jimmy Carter was in office. And the Federal Reserve? They refuse to change course and fix their mistakes.

In 2008, the Fed promised they could save us from economic collapse with a radical solution — by holding interest rates near zero — and then reverse policy after the crisis was averted. But seven years later, rates are still the same. The economy is still spinning its wheels, going nowhere fast. And workers are watching their real wages effectively decline as prices increase. The Fed promised that this would be a free lunch, but clearly this is not the case. They failed.

Now, the Fed wants to double down on seven years of failed policy by offering up negative interest rates as a solution.

Seriously. Via CNBC:

Last week, the Federal Reserve spooked markets by preserving the monetary policy status quo. Yet a few central bank watchers were more surprised by a new idea the central bank seemingly suggested: a negative interest rate.

The Fed’s closely watched “dot plot” revealed that at least one committee member floated the idea that a fed funds rate below zero might be an appropriate target for the remainder of this year and next.

The forecast is widely thought to be the work of Minneapolis Fed President Narayana Kocherlakota, a non-voting member of the committee who is known for his dovish views.

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Dante’s Inferno Suggests Why Washington Lies in the Eighth Circle of Hell — And How It Can Escape

Illustration by Sandro Botticelli: Dante and Virgil visit the eighth circle of Hell

Revealed, in my Forbes.com column last weekend:

Washington appears stuck in the Eighth Circle to which Dante assigns Falsifiers. Dante consigned alchemists and counterfeiters to the bottom of this next-to-lowest circle of Hell. As one commentator on classical literature notes Dante there encounters:

… an alchemist who extracted large sums of money from Alberto da Siena. Griffolino extracted money by promising Alberto that he would teach him to fly like Daedalus. When Alberto discovered he had been tricked, he had his “uncle,” the Bishop of Siena, burn Griffolino as a sorcerer. Griffolino is not punished for sorcery, but for falsification of silver and gold through alchemy.

[…]

As for alchemists, a long time ago — on August 15, 1971, to be exact — President Nixon succumbed to the blandishments of his Treasury Secretary John Connally to “close the gold window.” The promise was to make the economy fly. The dollar was converted from currency to money.  The promise proved false.

[…]

August 15, 1971 was the day the American Dream — of equitable prosperity — began to die. The Federal Reserve Note Standard was, in fact, an attempt at a sort of modernist alchemy.  It set the stage for the subsequent flat-lining of median family income. Now to turn that around.

[…]

The Fed’s halo noticeably is dimming. Word’s getting around. Before recess House Majority Leader Kevin McCarthy was handed a gift by Reps. Hensarling, Huizenga, Garrett, and Brady with the full committee passage of the Centennial Monetary Commission, H.R.

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Hey Jake Tapper, Ask About the Fed!

The Federal Reserve headquarters in Washington, DC (photo credit: Dan Smith, CC BY-SA 2.5)

Sen. Rand Paul and a co-author, on the occasion of today’s FOMC meeting and the morning before the second presidential debate, took to The Wall Street Journal editorial page to demand that the Fed stop meddling in the setting of interest rates.  (His short term prediction for the outcome of this admittedly presents as at least somewhat dire.)

It would be very refreshing were CNN’s moderators to give prominence to questions about the economy, job creation, and the candidates’ proposed remedies for the ongoing sluggishness in the economy.  That said, CNN should resist the temptation to perseverate on the candidates’ respective tax proposals.

Reaganomics, which vanquished a towering Misery Index and restored job growth, had not one but two components.  While his Kemp-Roth across-the-board tax rate cuts received most of the political and public attention, the blueprint for Reaganomics gave equal weight to restoring good monetary policy.  Under Reagan’s aegis, Fed Chairman Paul Volcker did just that.

Double digit inflation no longer is the presenting problem.  But bad money can manifest in a number of ways.  The current dramatic fall in commodities prices, and the dramatic rise of the dollar against the currencies of our trading partners, clearly is a result of Fed policy.  It is a deeply worrisome one, contrary to the Fed’s price stability mandate.

It could prove the “sleeper issue” of the 2016 race.  By grilling each of the candidates about where they stand in the Fed — and about the Brady-Cornyn monetary commission that Sens. Continue Reading

Washington’s Most Shocking Open Secret: The Fed’s Smoking Gun?

The Marriner S. Eccles Federal Reserve Board Building (photo via Wikimedia Commons, CC BY-SA 3.0)

As noted in my most recent Forbes.com column, it is now officially an open secret that the Fed always gets its forecasts egregiously wrong:

One of the world’s top monetary reporters, Ylan Q. Mui, to make a delicate observation at the Washington Post’s Wonkblog, in Why nobody believes the Federal Reserve’s forecasts. Mui:

“The market recognizes that the Fed has repeatedly erred on the optimistic side,” said Eric Lascelles, chief economist at RBC Global Asset Management. “Fool me 50 times, but not 51 times.”

Even the government’s official budget forecasters are dubious of the Fed’s own forecast.

And:

To give Ms. Mui’s competition its due, Dr. Richard Rahn at the Washington Times last April crisply noted:

“The Federal Reserve had forecast the U.S. economy to grow about 4 percent near the beginning of each year for the last five years. But during each year, the Fed was forced to reduce its forecast until it got to the actual number of approximately 2 percent. (Other government agencies have been making equally bad forecasts.) These mammoth errors clearly show that the forecast models the official agencies use are mis-specified and contain incorrect assumptions.”

My own observation about this:

If NASA suffered from comparable inaccuracy the manned spaceflight program would have been shut down by an endless series of Challenger-type catastrophes many years ago.   With forecasts this bad is it any wonder the American economy continually crashes and burns?

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