Robert Higgs ‘Accountability Needed at Fed’

Nearly 200 economists, mostly academics, have signed a petition urging Congress and the executive branch “to reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of U.S. economic stability.”

In defending the Fed against those now challenging the secrecy of its undertakings and, in some cases, its very existence, these economists offer three arguments.

First, “central bank independence has been shown to be essential for controlling inflation.”

Recall, however, that for more than a century before the Fed’s establishment in 1913, the purchasing power of the dollar fluctuated around an approximately horizontal trend line. Despite inflations and deflations usually associated with the wartime issuance of fiat money and the postwar return to specie-backed currency, the dollar more or less retained its exchange value against goods and services over the long run. Since the Fed’s establishment, however, the dollar has lost more than 95 percent of its purchasing power. Is this horrible record what these economists consider “controlling inflation”? If so, they have placed the performance bar much too low.

… Read More (Author: Robert Higgs Source: mcclatchydc.com Date: 08.05.09)

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Tags: audit the fed, hr 1207, robert higgs