Are you the kind of person who wants to know first thing in the morning how the financial markets are doing? Do you pay close attention to every speech by a Federal Reserve official, every interview, to see how they view the economy? To find out what they’re thinking?
Many people do. Smart people. People who have learned that there is money to be made by following these things closely.
That’s because the decisions made by Federal Reserve officials have an enormous effect on the performance of financial markets.
Big investors, hedge fund managers, and a multitude of professional financial analysts who give advice—they all focus like a laser when Fed Chairman Jerome Powell comments about future economic developments. Because he might give clues about when the Fed could start reducing its monthly purchases of $120 billion in U.S. government-backed debt.
But what if you personally don’t have time to dissect all these communications, looking for hints about the Fed’s next move.
Should it really matter what an unelected monetary official says or thinks?
If Fed officials decide to continue buying huge amounts of U.S. Treasury debt and mortgage-backed securities issued by government-owned agencies, it will keep interest rates artificially low—financial markets will likely keep rising—but does it put our country back to work? Does that support productive economic growth?
Here’s the big question. Should an economy based on free markets, and free enterprise, be so dependent on the decisions of a small group of monetary officials employed by a government agency the Federal Reserve?
Should they have the authority to decide whether interest rates should be higher or lower—and the power to make it happen by creating money with a digital blip?
Our founding fathers never envisioned that; money was not meant to serve as an instrument of government policy.
The Constitution grants Congress the right to regulate the value of money in the very same sentence that it grants Congress the right to establish our nation’s official weights and measures.
Because money is meant to be a standard—a dependable measure—that works for everyone by providing clear price signals to the economy. I think America’s founders were right on the money.
