As F. A. Hayek said in The Constitution of Liberty, “All those who wish to stop the drift toward increasing government control should concentrate their efforts on monetary policy.” His words, written in 1960, still hold true today. The conversation of monetary policy is picking up steam, as an increasing number of Americans become concerned or disillusioned with the Fed policy and its ability to “fix” the market. It is an old debate that has been hashed and rehashed over decades, and each time, we forget the lessons learned. Sound money and fiscal responsibility cannot be discarded. As Matt Kibbe noted, “We have to live within our means.”
Big government, big spending, and printing money to pay for it are not the solutions to economic crises. These are not new ideas. They have been tried and seen to fail in the past, and they will continue to fail in the future. The fiscal stimulus by the federal government and attempts by the Federal Reserve to reduce unemployment will be no different. These forays into the market cause ripples that will be felt for years to come. Alex Chafuen describes the negative results of these attempts in other countries, notably Argentina. The end of sound money leads to the destruction of prosperity.
The government cannot buy its way out of a recession, neither through fiscal spending or monetary policy. Such attempts further hamper the market’s ability to correct, slowing recovery and setting up causes for future crashes. As Congressman Mike Pence stated, “to restore a growing economy, we must end all this runaway federal spending and get back to the practice of free market economics without apology.”
Sound money is the foundation of a good economy. This idea ran throughout the forum. Money provides the incentives for productivity. What we earn today will sustain us through tomorrow, but only if its value holds true. Once distorted – weakened, lessened – the incentives change. Our savings disappear from under us and uncertainty enters the equation. In the words of Dr. Judy Shelton, “Inflation, even low inflation, makes suckers out of savers. Money has to be trustworthy…”
The Fed came under fire for its attempts to juggle employment at the expense of the currency, though the Fed, as Congressman Paul Ryan pointed out, is the sole guarantor of our money. His recommendation to end the dual mandate of the Federal Reserve has gained traction with the public. The security of the currency, the strength of the dollar, is the key to growth, and the political nature of unemployment threatens that security and strength.
Dr. Lawrence H. White followed Representative Ryan to point out that the Fed, even as it sacrifices the strength of the dollar, is not able to satisfy its unemployment mandate. His recent work has shown that the Fed has a destabilizing effect on the economy, creating business cycle, or at least not preventing them.
The conversation of sound money is an important one to continue. To echo Brad Lips closing remarks, it is good to see this debate moving to “the front burner of public policy discussions”. It is our hope that this forum is just the beginning. As we move forward, more attention must be paid to the issues of sound money and the policies of the Federal Reserve.
Sound Money Fellow
Atlas Economic Research Foundation
Image by Carlos Porto / FreeDigitalPhotos.net.