by Mitch Kokai
Senior Political Analyst, John Locke Foundation
THE FEDERAL RESERVE’S new chairman, Jerome Powell, recently presided over his first meeting of the Federal Open Market Committee, which sets central bank policy, most particularly the level of interest rates. Powell looks to continue the same destructive policy that has done so much harm to the economy.
The episode underscores that our central bank won’t rid itself anytime soon of its three fatal flaws:
—The belief in funny money, that is, an unstable dollar. The Fed never resists when the Treasury Department wants a weaker greenback, as happened in the early 2000s under President George W. Bush. No country does well with wobbly money. …
… –The bogus theory that prosperity causes inflation. One newspaper commentator–reflecting the predominant thinking–said Powell faces the tricky task of increasing unemployment while avoiding a recession. This fake holy writ comes from the long-discredited Phillips Curve. …
… — The belief that the Fed can guide the pace of economic activity–and drive the economy like one would an automobile. Its tool to do this is manipulating interest rates. The fact that for more than a decade our central bank has consistently misjudged how the economy would perform has made little impression on the way in which its personnel view the world. The notion that a handful of Beltway-based economists can control an immense economy of hundreds of millions of people and millions of entities is so preposterous as to defy belief.