1.2.4: Federal Reserve.
Reform the Federal Reserve. Other Information:
JOBS AND PROSPERITY PLAN: REFORMING THE FEDERAL RESERVE I will also include in jobs and prosperity legislation provisions
to reform the Federal Reserve. They will include a full-scale audit of Federal Reserve activities as well as a narrowing of
the Fed’s statutory mandate. The amount of money Chairman Bernanke has allocated in secrecy is incompatible with a free society.
Every decision document and meeting record for 2008 to 2010 should be made public and audited. We the people deserve to know
how our money is spent. The Fed's monetary policy discretion should be limited to following a price rule guiding the conduct
of monetary policy. The Fed should monitor the signals provided by sensitive commodity prices with the goal of maintaining
stable prices, thereby contributing to a stable dollar without inflation. The operations of the Federal Reserve have an extraordinary
impact over our everyday lives. The Fed influences how much money is circulating in the economy, the value of the dollar,
and what we pay to borrow from banks in the form of interest rates. Since the enactment of legislation in 1978 known as the
Humphrey-Hawkins Act, the Fed has had a dual mandate: maximum employment and stable prices. These two goals are incompatible.
Senator Bob Corker may have said it best when he described the Fed as having today a “bipolar mandate.” This means that the
same policies that the Fed uses to encourage job and economic growth are also the mechanisms that most dangerously weaken
the value of the dollar by promoting inflation. For example, the Fed might increase the money supply substantially in the
belief that such monetary expansion will spark economic growth. But a Fed that floods the economy with new dollars in an attempt
to stimulate economic growth and new jobs is a Fed that decreases the value of every dollar in every American’s pocket through
higher inflation, making every American poorer. Historically low interest rates made possible by Fed policies over the past
decade fueled an inflationary housing bubble. Home prices exploded due in part to the availability of cheap credit only to
collapse disastrously in 2006 and 2007. As a result, the average American’s home is worth no more than it was a decade ago.
The Fed’s dual mandate also negatively affects job creation. To put it briefly, we will never be able to achieve sustainable
long-term job creation in this country if the Fed continues to artificially affect the level of interest rates. Artificial
interest rates distort investment decisions all across the economy, resulting in a misallocation of productive resources that
cannot be sustained over the long term. Eventually, artificially low rates lead to an economic bust and widespread job losses.
Only when interest rates are no longer manipulated can businesses and entrepreneurs determine the right investments that can
in turn lead to sustainable job creation throughout the economy. Finally, the Fed's low interest rate policy has unfairly
punished savers in general and retirees in particular. No one can live off the interest on their savings when it has been
artificially kept low by the Fed.
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