Recently, an article titled “Angus King Opposes Federal Reserve Audit” was run on Undercover Porcupine discussing a letter from the King Senate Campaign to Libertarian Party of Maine Secretary Aaron Quinn. Quinn has been attempting to receive clarification from King regarding the opposition to a Federal Reserve audit, specifically, “The Federal Reserve Transparency Act” sponsored by Senator Rand Paul (R-Kentucky). Recently to follow up the e-mail from his policy staffer, King responded to him:
The job of the Federal Reserve is very difficult. There are never simple answers to uncertain times and financial conditions. While it is true that the Federal Reserve played a role in creating the conditions that allowed the financial crisis of 2008 to explode, it also created an environment that formed the basis for the economic growth of the 90s. If the deliberations were to be audited and essentially public, the entire decision-making process would be altered materially.
The Fed’s responsibility in terms of monetary policy is to control inflation without triggering economic recessions. In recent times, the Fed has become more active in responding to economic downturns by adding liquidity to the system in an effort to lessen the impact of an economic downturn, particularly when the Fed has not see an immediate inflationary threat. These are by their nature extremely difficult calls, as inflation is a function of people’s expectations. Inflation is a bit of a self-reinforcing cycle; if you expect inflation, you will demand increases built into your labor contract, which will further drive inflation. In essence, the Federal Reserve’s job is inherently extraordinarily difficult and full of uncertainty. Given the above, there has been consistent support for maintaining a degree of separation of the Federal Reserve from the political process. This is evident in the structure of appointments. The President appoints and the Senate must confirm the Governors of the Federal Reserve for terms of 14 years with only one of the seven board members coming up for replacement every other year.
While it is not surprising that there are efforts to politicize the Fed’s decision-making process, I believe that it will in fact create more issues than it will address.
King is right, the Federal Reserve’s job is difficult and there lacks a clear answer to the various problems our economy faces. This is why the Constitution left the decision to the market, which is dependent on the people.
The Federal Reserve has triggered recessions and depressions, created various bubbles including the most recent housing bubble that crippled the economy. They even sparked the Great Depression, which current chairman Ben Bernanke even admitted at a gathering honoring economist Milton Friedman’s 90th birthday.
Apparently the great economic hardship of the 1930’s was not reason enough to want greater controls over the monetary policy. Control over the currency, which was meant to be backed by gold or silver, was granted to Congress in the Constitution in order to keep power over the foundation of the U.S. economy in the hands of the people, not secretive bankers. Following the Constitution, however, is apparently politicizing the process.
Just how much more of the Constitution does Angus King wish to ignore, in order to not “politicize” our democratic process of government? Is transparency in our republic that dangerous to our economy? The lack of transparency plan seemed to work well with TARP and other federal bailout programs. The AIG bailouts for example, which Senator Barack Obama (D-Illinois) voted for, resulted in $165 million in executive bailouts. King might as well agree to caucus with the Senate Democrats, as he appears to live under the same illusion that transparency is dangerous and we need not “politicize” the economy.
If it’s not protecting the creation of more money out of thin air, devaluing the hard-earned dollars of Americans while raising the market prices that they pay, then it’s supporting the direct robbing of the people to pay executive salaries. Transparency is required and that is a bipartisan agreement, especially with the Federal Reserve issue, as demonstrated by the overwhelming approval of the U.S. House.
Angus King still wants to be the next United State Senator from Maine, but with his opposition to improving the economy and increasing transparency, it is difficult to justify him claiming the seat of retiring Senator Olympia Snowe.