George Gilder: Angry About Inequality? Here’s the Real Culprit… (VIDEO)

George Gilder is most recently the author the ground breaking The Scandal of Money: Why Wall Street Recovers but the Economy Never DoesHe is a founding fellow of the Discovery Institute and a senior fellow at the American Principles Project, which sponsored this book.

Gilder is also the author eighteen other well-regarded books including Knowledge and Powerand Microcosm. After the publication of Wealth and Poverty, he became Ronald Reagan’s most frequently quoted living author.

In the following clip — from a speech Gilder gave at FreedomFest 2016 — he discusses how near-zero interest rates, far from stimulating economic growth, actually create an environment which fosters inequality.

Zero interest rates essentially zero out time.

As Hayek put it, the root and source of all monetary evil is the government monopoly of money. Matt Ridley said the government monopoly of money not only suppresses innovation and creativity, not only retards growth, it also fosters inequality. Because what we have today is a bifurcated economy produced by the government monopoly of money that fosters inequality.

Think of most of us. Most of us get paid by the hour, paid by the day. We are inexorably caught in the economy of time; that’s how we get compensated. But what’s happened in the world economy in recent decades as a result of the government monopoly of money and that exploitation of that government monopoly to allow the unlimited expansion of government power through the creation of money.

What’s happened is a financialization, a hypertrophy, of finance in the world economy.

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Fed Up! Hillary Clinton in Cahoots with Attempted “Hostile Takeover” of the Fed

Fed Up activists assemble outside a Congressional hearing (photo credit: Ralph Benko)

I’m fed up with the Fed too, with its chronic policy failures. A lot of evidence shows the Federal Reserve to be a prime cause of lackluster job growth and sluggishness in wage increases.

That said, sometimes a cure is worse than the disease. Now the left, with the support of Hillary Clinton, is threatening to take us, to mix the metaphor, out of the frying pan and into the fire.

Last week, about a dozen arch-progressives from “Fed Up” attended a hearing of a subcommittee of the House Financial Services Committee, “Federal Reserve Districts: Governance, Monetary Policy, and Economic Performance” in Rayburn House Office Building. I also attended.

The title of the hearing sounds boring. What was really going on was anything but boring.

I wrote about this hearing at length in my most recent column at Forbes.com, “The Left’s Fed Up Makes A Naked Power Grab For Control Of The Fed“:

In scope, the left’s plan makes trivial by comparison Auric Goldfinger’s “Operation Grand Slam” to contaminate America’s gold holdings at the US Treasury Depository at Fort Knox. Goldfinger planned to turn them radioactive. Those holdings amounted, in 1964, to about $14 billion. They are now valued at close to $200 billion.

Either way, a tidy sum. Yet it’s just a nickel compared to the Fed’s more than $4 trillion holdings.

Most impressive. The left is undertaking its own Operation Super Grand Slam.

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Hillary Clinton Elevates the Federal Reserve to God-Status

Former Secretary of State Hillary Clinton (photo credit: State Chancellery of Latvia via Flickr, CC BY-SA 2.0)

On Monday, Donald Trump stated what is essentially a fact to anyone who follows financial markets — the Federal Reserve has created a “false economy” that has artificially inflated the stock market.

Via Reuters:

“They’re keeping the rates down so that everything else doesn’t go down,” Trump said in response to a reporter’s request to address a potential rate hike by the Federal Reserve in September. “We have a very false economy,” he said.

“At some point the rates are going to have to change,” Trump, who was campaigning in Ohio on Monday, added. “The only thing that is strong is the artificial stock market,” he said.

This isn’t controversial. The financial media constantly speculate about whether the Federal Reserve will raise interest rates and how that will impact the markets. It is generally understood that higher interest rates spell trouble for equities — and that would be especially true given the historically overbought status of the stock market.

Hillary Clinton certainly knows this. She’s not stupid. But, whether out of loyalty to Goldman Sachs or out of political expediency, Clinton responded to Trump’s comments by defending the Federal Reserve as an institution that should be above reproach:

Democratic presidential candidate Hillary Clinton criticized Republican rival Donald Trump on Tuesday for making comments about the Federal Reserve’s monetary policies, which she said should be off-limits for U.S. presidents and presidential candidates.

“You should not be commenting on Fed actions when you are either running for president or you are president,” Clinton told reporters on her campaign plane.

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George Gilder: Here’s How to Achieve a Real Economic Recovery

George Gilder, author of The Scandal of Money: Why Wall Street Recovers but the Economy Never Does, recently joined Dawn Bennett on her radio show “Financial Myth Busting” to discuss the continuing economic challenges facing the U.S. and how to overcome them. The key, according to Gilder, is getting our money right.

Here’s a taste from the interview:

BENNETT: Why does Wall Street recover from recessions, or these types of recessions and Main Street never does?

GILDER: Because of the financialisation of the economy, the futile effort to replace production with finance and savings with credit, and it doesn’t work. We’ve created this closed loop economy where the Fed creates money and, by their own data, 62% of it goes to the banks which in turn use it to purchase government securities and finance the government. And two thirds of the rest goes to the top five hundred corporations which use it not to invest these days but rather to buy back their own shares and then cosmetically improve the stock market. It’s a closed loop economy between Washington and Wall Street that leaves out Main Street.

BENNETT: Your book centers around something we’ve talked a lot about on the show, which is even as the government has literally spent trillions in fiscal stimulus and printed trillions of monetary stimulus, the result is merely creating this illusion of a recovery. Why is this recovery not like a genuine recovery?

GILDER: Because it’s based on zero interest rates which zero out the future.

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Revealed! Donald Trump Promises Policies to Bring About the Greatest! Depression! Ever!

Donald Trump (photo credit: Gage Skidmore)

CNN recently reported on GOP presidential front runner Donald Trump’s stance(s) about the Fed:

[J]ust two days ago, Trump tweeted that he thinks the Fed should be audited. This is something that fellow Republican candidate Ted Cruz supports as well as former candidate Rand Paul.

Trump chided Cruz in his tweet for missing a Senate vote on an “Audit the Fed” bill in January. The bill failed 53-44.

Trump, in his usual way, by way of baiting his rivals and confusing voters, omitted two crucial points.

First, Cruz’s Senate vote would not have led to a different outcome. It would have been purely symbolic. And Cruz was one of the original co-sponsors of that legislation, and of the even more important Brady-Cornyn Centennial Monetary Commission. Ample symbolism. CNN:

Trump’s tweet was the first time he specifically came out in favor of a full audit of the Fed. Could an audit make the Fed great again? Hmm.

Trump’s tweet looked, and looks, like an opportunistic way to bash a rival. Not a serious proposition. If Trump believed that auditing the Fed was, in the words of his tweet, “so important,” why did he wait until late February 2016 to say so?

And why in a tweet rather than in a major policy speech? CNN:

But Trump actually has already accused the Fed of being too political.

In an interview with The Hill in October, Trump said Yellen was keeping interest rates low so President Obama “doesn’t want to have a recession-slash-depression during his administration.”

That interview took place before the Fed raised rates for the first time in nine years in December.

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Challenging the Fed’s “Inflated Reputation”

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

Last week at The American Spectator, Bob Luddy aimed some harsh criticism at the Federal Reserve, blaming the Fed’s policy of keeping interest rates artificially low with causing a decline in the value of the dollar and undermining economic growth:

The Federal Reserve Bank, commonly referred to as “The Fed,” has a policy to inflate the dollar by 2% annually. This is an absurd policy, which undermines our currency. The methods the Fed uses to achieve this policy distort and undermine sustainable economic growth.

The Fed was established in 1913 as the Central Bank of the United States, for the purpose of maintaining a stable banking system and supporting sound money. But the opposite has happened. Since the founding of the Fed, the dollar has lost more than 90% of its value.

The Fed manipulates the money supply with artificially low interest rates to create inflation. This policy enables the federal government to expand deficit spending without the penalty of market interest rates. But interest is a cost that is important to sound business calculations; a sound economy requires financial reality.

By manipulating rates, the Fed undermines all economic decisions and creates market distortions. This manipulation results in economic bubbles that are challenging to detect, until it’s too late.

[…]

You can read the full article here.

Paul Dupont is the managing editor for ThePulse2016.com. Continue Reading

Rand Paul Likens Fed to Soviet Politburo After Interest Rate Increase

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

On Wednesday, the Federal Reserve announced that it was raising interest rates for the first time in seven years. Surprisingly, longtime critic of zero interest rates Senator Rand Paul skipped the expected sigh of relief, instead expanding his criticism of the Federal Reserve’s role in setting the value of money:

“Is it a good thing or a bad thing to raise the interest rate?” Paul asked. “Well, I’m kind of agnostic on it. It’s kind of like if you ask me: All right, should the Politburo raise the price of bread or lower the price of bread? I like both prices, but the real question should be: Should the government be involved with setting prices? What amazes me about the Federal Reserve setting interest rates is that almost to a person, conservative economists in our country will say, wage and price controls are a mistake.”

The Soviet references seem a little overboard, but it’s good to hear Senator Paul bring up the important question of whether the federal government should be in charge of setting the price of anything, much less the value of the dollar. Rand Paul has been a big advocate in Congress of reform packages like the Centennial Monetary Commission, which passed the House last month as part of the FORM Act. As 2016 heats up, I’m looking forward to Senator Paul continuing to lead a national discussion on the future of U.S. monetary policy.

Nick Arnold is a researcher for the American Principles Project. Continue Reading

Antiquated Fed Raises Interest Rates for First Time in Nearly a Decade

Photo credit: Kurtis Garbutt via Flickr (CC BY 2.0)

Today, after seven years, the Federal Reserve finally took steps toward ending its failed zero-interest rate policy, announcing in a unanimous decision that it would raise the federal funds rate a quarter of a percent, or 25 basis points, in its first interest rate hike in nearly a decade.

It is absolutely befuddling that the Fed took so long to increase rates a measly 25 basis points. The last time interest rates were above the 0.25 percent threshold, Miley Cyrus was still known to America for her wholesome children’s show Hannah Montana.

The Federal Reserve still needs massive reform. Its current model is antiquated, arbitrarily basing decisions off of past economic indicators, not present or future outlooks. For more than 40 years, they’ve been playing a high stakes guessing game with interest rates. When the Fed guesses wrong, whether too high or too low, it distorts our economy, investments, and opportunities.

We need the Fed to get out of the way and let the free market determine interest rates. An important first step toward reforming the Fed is to pass the Brady-Cornyn Monetary Commission, which would analyze and recommend the best monetary policy for a 21st century economy.

Terry Schilling is the executive director of American Principles in Action. Continue Reading

Carson Draws Liberal Ire for Criticism of Fed

Dr. Ben Carson (photo credit: Gage Skidmore)

With all the recent criticism heaped on the Federal Reserve by Republican candidates, I suppose a media backlash was inevitable.  Timothy Lee, writing for Vox, has attacked Dr. Ben Carson’s comments that the Fed’s zero-interest-rate policy hurts savers.  He didn’t do this by disputing Carson’s claim, but by saying that it’s more important for the middle class to be able to borrow than to save:

The most obvious problem with the Nader and Carson arguments is that they ignore the fact that ordinary people don’t just save money, they borrow it too. If you’ve bought a house in the past few years, you probably benefited from today’s exceptionally low interest rates. If you bought a house 10 or 20 years ago, you probably benefited from being able to refinance your mortgage in the past few years. That’s thousands of dollars in lost income for the big banks Nader loathes so much.

“If you’ve bought a house”?  Let’s leave aside the fact that homeownership is at a 40-year low and ask: how many Americans are actually borrowing money?  It might be nice to have lower interest rates when one buys a first car, or when trying to start a business, but the best way to make sure the banks lose income is to pay off the full amount as soon as one can.  Furthermore, the 90 percent of Americans that don’t own a business don’t need the kind of loans Lee is talking about. Continue Reading

Christie Slams Fed for Zero Interest Rates, Calls for Audit

New Jersey Governor Chris Christie sat down with Fox Business’ Maria Bartiromo this week, where he condemned U.S. monetary policy under the Obama administration.  Christie said the Federal Reserve’s zero interest rate policy has left America with “nothing in the toolbox” in case of another U.S. recession, and criticized the President for pressuring the Fed to continue it.  He also called for an audit of the Federal Reserve to restore the trust that has been strained after “several rounds of Quantitative Easing.”

You can watch the interview below (Christie’s Fed comments start around 3:50):

CHRISTIE: What I think we’re going to see coming out of this is the Fed, who has kept interest rates at zero, now have nothing in the toolbox in case we do go into recession.  Where are we going to go from here?  They should have been raising rates appropriately before, now they’ve got no tools left in the toolbox.  We could face a real big problem and soon.

BARTIROMO: You’re not the first person to criticize the Federal Reserve.  Let’s say you do become President of this great country…what do you do with the Federal Reserve?

CHRISTIE: Well, you want the Federal Reserve to be independent, and you want them to make decisions not based on politics, but upon sound monetary policy.

BARTIROMO: So can you affect that at President?

CHRISTIE: Well you affect it by the people you appoint, absolutely.  And you try to affect it by your rhetoric.  You don’t wind up trying to send signals to the Fed, you know, winking at them and saying “hey, maybe you should do this, and do that.”  Because you should let them control monetary policy in the country. 

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