It’s greatly encouraging to see the GOP candidates focus more on one of the largest economic problems facing the United States: the Federal Reserve and monetary policy. On Tuesday night, we witnessed the GOP field address monetary reform as a key to economic fairness and growth in a bigger and more substantial way than ever before. Candidates centered their comments on the problems created by the Federal Reserve’s artificially low interest rates and how it has adversely affected equitable prosperity through rising prices and stagnant wages for working families.
The Federal Reserve’s zero interest rate policy repeatedly came under fire at the Fox Business GOP debate, and several candidates chimed in on the issue substantively:
Rand Paul: “I think the Federal Reserve has made [income inequality] worse. By artificially keeping interest rates below the market rate, average ordinary citizens have a tough time earning interest, have a tough time making money. They’re actually talking now about negative interest. The money as it’s created through quantitative easing or other means tends to start out in the big banks in New York. And because we’re now paying interest for them to keep the money there, much of that money has not filtered out into the economy. So what we’re finding is there is increasing income disparity and income inequality.
“We also find that as the Federal Reserve destroys the value of the currency, what you’re finding is that, if you’re poor, if you make $20,000 a year and you have three or four kids, and you’re trying to get by, as your prices rise or as the value of the dollar shrinks, these are the people that are hurt the worst. So really we need to reexamine whether we not — we want a Federal Reserve that’s involved so much in determining interest rates. We also need to look at root causes as to what caused the housing boom and the housing collapse.”
Ted Cruz: “Now, let’s be clear, there is a role for the Federal Reserve — what the Fed is doing now is it is a series of philosopher- kings trying to guess what’s happening with the economy. You look at the Fed, one of the reasons we had the financial crash is throughout the 2000s, we had loose money, we had an asset bubble, it drove up the price of real estate, drove up the price of commodities, and then in the third quarter of 2008, the Fed tightened the money and crashed those asset prices, which caused a cascading collapse. That’s why I am supporting getting back to rules-based monetary system not with a bunch of philosopher-kings deciding, but tied ideally to gold —
So let me be clear. I would not bail them out, but instead of adjusting monetary policy according to whims and getting it wrong over and over again and causing booms and busts, what the Fed should be doing is, number one, keeping our money tied to a stable level of gold, and, number two, serving as a lender of last resort. That’s what central banks do. So if you have a run on the bank, the Fed can serve as a lender of last resort, but it’s not a bailout. It is a loan at higher interest rates. That’s how central banks have worked.
And I’ll point out — look, we had a gold standard under Bretton Woods, we had it for about 170 years of our nation’s history, and enjoyed booming economic growth and lower inflation than we have had with the Fed now. We need to get back to sound money, which helps, in particular, working men and women. What Washington does — the people who are doing well in the Obama economy are those with power and influence in the Obama government.
Chris Christie: “The middle class is doing worse than it’s ever done before, and the investor class – the wealthy – are doing even better because of this cheap money from the Fed. And here’s the worst part, we had one and a half percent GDP growth last quarter. If we slide back towards a recession, you cannot lower interest rates below zero. Where are we going to go if we need help if the economy slides back into recession? The Fed should be audited and the Fed should stop playing politics with our money supply. That’s what they’ve done. It’s been the wrong thing to do. It’s hurting the American economy.”
Rick Santorum: “[The Fed is] protecting a president that is over-taxing and over-regulating, shutting down this economy. And they’re keeping it up like Atlas, trying to hold up the Earth by these ridiculously low interest rates. And it’s hurting American seniors, who are seeing no Social Security increases, seeing no savings. They’re putting their money aside, and they’re getting nothing in their deposit accounts. This is hurting the people who have acted responsibly all in favor of those who are speculators and those on Wall Street. It’s not a good deal for the vast majority of responsible Americans.”
Mike Huckabee: “I think the Fed is in big trouble because they haven’t addressed the number one issue that’s hurting Americans and that’s the fact that wages for the bottom 90 percent of the economy have been stagnant for 40 years. In the 25 years after World War II, up to 1971, wages grew by 85 percent in this country. People were moving up in the middle class. There was a middle class. That’s not happening anymore, and in large measure, the Fed has manipulated the dollar so it doesn’t have a standard. Tie the dollar to something fixed, and if it’s not going to be gold, make it the commodity basket. We absolutely have to get it where the people who go out there and work get something in return. And if the dollar keeps fluctuating, and this is as crazy as the price of bread, well the fact is, people can’t get ahead then.”
Sean Fieler is the Chairman of the Board of the American Principles Project.