Following Monday’s historic stock market downturn, many politicians and so-called economic experts rushed to the microphones to explain why the market crashed and to propose “solutions’ to our economic woes. Not surprisingly, most of those commenting not only failed to give the right answers, they failed to ask the right questions.
Many blamed the crash on China’s recent currency devaluation. It is true that the crash was caused by a flawed monetary policy. However, the fault lies not with China’s central bank but with the US Federal Reserve. The Federal Reserve’s inflationary policies distort the economy, creating bubbles, which in turn create a booming stock market and the illusion of widespread prosperity. Inevitably, the bubble bursts, the market crashes, and the economy sinks into a recession.
An increasing number of politicians have acknowledged the flaws in our monetary system. Unfortunately, some members of Congress think the solution is to force the Fed to follow a ‘rules-based’ monetary policy. Forcing the Fed to ‘follow a rule’ does not change the fact that giving a secretive central bank the power to set interest rates is a recipe for economic chaos. Interest rates are the price of money, and, like all prices, they should be set by the market, not by a central bank and certainly not by Congress.
Instead of trying to ‘fix’ the Federal Reserve, Congress should start restoring a free-market monetary system. The first step is to pass the Audit the Fed legislation so the people can finally learn the full truth about the Fed. Congress should also pass legislation ensuring individuals can use alternative currencies free of government harassment.
This post was published at GoldSeek on Sunday, 30 August 2015.
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