Audrey Westcott | Student Life

By announcing an engagement in quantitative easing, Chairman of the Federal Reserve Ben Bernanke has further contributed to the precipitation of runaway inflation and a severe dollar crisis. As the money supply increases, purchasing power decreases along with it, disproportionally affecting individuals in the lower and middle classes because of their fixed incomes. While the wealthy shelter themselves from the coming inflation, the poor will quickly discover that their dollars buy considerably less than before. The middle class will find that their savings have evaporated overnight.

Since its inception in 1913, the Federal Reserve has undertaken policies aimed at planning the economy with the unintended consequence of debasing the dollar. The Fed was created under the pretense of keeping inflation in check and preventing future panics and depressions. Instead, the United States’ past century has been marked by a boom-bust cycle as the unintended consequences of the Federal Reserve have created bubbles of artificial growth that ultimately lead to market crashes.

Every crash has been subsequently followed by more government intervention and more destructive economic planning, further interfering with the action of the market. The prolonged nature of the current recession by government intervention and the simultaneous continued growth of economic central planning demonstrate this point.

A central bank is not required, nor is it authorized by the Constitution. Aiming to limit the power of government and to decrease the chances of tyranny, the Founding Fathers allowed for only sound money in the new country. Article I, Section 10 clearly states that, “No State shall…make any Thing but gold or silver Coin a Tender in Payment of Debts.” To be sure, the Coinage Act of 1792 was soon passed, linking the dollar with gold and silver. A gold standard requires no planning, no intervention and no meddling in the economy. The Founders’ sympathy to gold and silver wasn’t unique; it has been present in free societies for thousands of years. By following a gold standard, the money supply is not only backed up by hard assets but also safeguarded against inflation. Gold can’t simply be printed and it has retained its value for millennia, the opposite of fiat, or paper, currency.

The Federal Reserve couldn’t stand idly by, however, and has severely interfered with the intentions of the Founders. FDR made private gold ownership illegal in 1933 and Nixon abolished the Bretton-Woods agreement in 1971, ultimately de-linking the dollar from any hard asset. The gold standard is not an ancient relic of past times, but a safeguard against an expansion of the money supply and an out of control government.

Acting in almost complete secrecy, the Federal Reserve is unaccountable, unelected and overseen by no one. Delegating power over monetary control away from Congress is un-Constitutional, although it’s hard to argue Congress could do a better job. Instead, we must return to hard money and move away from the printing presses that have wreaked havoc in the past century. If we desire honest government, we must seek honest money.

Today, our nation faces runaway spending, an ever-growing federal government, perpetual war around the globe, unsustainable entitlements and record deficits. These are symptoms of the Federal Reserve. Without having to raise taxes for revenue, Congress can simply call on the Federal Reserve to pay for wars, entitlements or any other program it deems necessary. The day of reckoning is coming, though, when the Federal Reserve will no longer be able to act as the nation’s credit card.

As the value of the dollar continues to decline, so does the health of our economy. The Federal Reserve has pursued short-term policies with little regard for long-term consequences. Booms make everyone feel good in the short run, as during the 1920s or 2000s, but always lead to a disastrous crash, further weakening the economy and the dollar. Investors around the world are flocking away from the dollar and our economy. Gold is at an all-time high, signaling that there is going to be little faith in our paper currency for much longer.

The support for a repeal of the Federal Reserve Act is bipartisan and encompasses the entire political spectrum. For moral, economic and Constitutional reasons, the Federal Reserve should no longer be allowed to debase our currency at the expense of the people, for the gain of the privileged few.

The problem isn’t simply that one man is incorrectly making decisions that affect the global and domestic economies. The problem is that one man has such a power at all. Only the market can decide what the proper interest rate should be. These choices shouldn’t be left up to economic planners who have failed time and time again despite their claims of good intentions. The free market is the most honest way of conducting business and has allowed our country the greatest explosion of economic prosperity in world history.

Currently under the United States Code, the Fed is exempt from audit regarding “(1) transactions for or with a foreign central bank, government of a foreign country or nonprivate international financing organization; (2) deliberations, decisions, or actions on monetary policy matters (3) transactions made under the direction of the Federal Open Market Committee; or (4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection,” or, as I like to put it: everything they do. H.R. 1207 removed exceptions one through four and opened the Fed to audits of all their dealings.

When the bill was referred to the House Domestic Monetary Policy and Technology Subcommittee, the language was weakened by Chairman Mel Watt, D-N.C. Watt, who has received more than $200,000 from the commercial banking industry since he entered Congress, stripped the bill of all sections allowing for an audit, leaving only a hollow call for Fed transparency. It is unlikely that Watt, whose district has been gerrymandered such that he could be caught with a goat and still be re-elected, has been receiving very many calls from his constituents demanding a completely secret central banking system. Therefore, it is probable that Watt has other interests in mind when he prevents Federal Reserve transparency from becoming a reality.

The Federal Reserve is regarded by the Austrian School of Economics to be the engine of the business cycle. In a theory promoted by Austrian economists such as Freidrich von Hayek and Ludwig von Mises, the Fed causes the business cycle by setting the interest rate lower than the natural rate dictated by the market. This deludes producers into believing there are more savings in the economy than truly exist and causes them to take excessive risks to produce more than could possibly be consumed.Consequently, producers have to take major losses and retract their projects. Furthermore, the Fed’s inflationary monetary policy, agreements with foreign nations and collusion with large banks affect everyone. The Federal Reserve is a creature of Congress, and therefore, it is the right of the people to know what the Fed is up to.

There are concerns, of course, about preventing sensitive financial information from being released immediately. For this reason, the author of the bill, Congressman Ron Paul, has agreed to a time lapse between Fed action and an audit. This compromise is fair, and there is no reason why the American people cannot have full transparency in their central bank after such precautions have been added. The United States has now come the closest to Federal Reserve transparency since its mysterious inception on Jekyll Island 96 years ago. The more the Fed resists these efforts, the more reason we have to believe they have something to hide.

Philip is a sophomore in Arts & Sciences. He can be reached via e-mail at pchristofanelli@hotmail.com.

Treasury Secretary Timothy Geithner, former head of the New York branch of the Federal Reserve, recently asserted in a speech that the Chinese government manipulates its currency.

This statement adds to the uneasiness the Chinese government already feels toward the new president and his administration.

According to experts on China, the government is concerned that the Obama administration will also take a hard stance on pollution generated by Chinese factories and on human rights violations.

The uneasiness was expressed in an editorial last week published in the China Daily, which praised former President Bush’s actions toward China and pondered what the Obama administration’s intents toward China might be.

China is in a less comfortable position than it was just two weeks ago during the Bush administration. Bush and Henry Paulson, secretary of the Treasury in the Bush administration, sought to improve relations with China by working with Chinese leaders and not taking stances on controversial Chinese issues.

Since Obama has little experience working with China, and because none of his advisers are experts on Chinese diplomacy, some fear that relations between the United States and China will fall apart.

“Just from my opinion, its hard to say whether Obama will hurt China because Obama just became the president,” Ph.D. student Baili Min said. “We haven’t seen his actions yet, but I don’t think that Chinese people will fear Obama, because the Chinese-American relationship is not decided by the personality of just one president; there are so many things to consider.”

Others, however, do not follow the Chinese-United States diplomatic dynamic while at the University.

“I’m really not positive about the Chinese-American political situation,” freshman Jennifer Ma said.

Despite the Chinese government’s fears about Obama, since November, Obama has become a popular figure among young Chinese people, with a Chinese translation of his book “The Audacity of Hope” soaring to bestseller lists there.

“Everyone now knows Obama is the president of the United States,” Ma said. “The Chinese people want the [Chinese] government to be friendly toward Obama.”

Many people in China, Min said, are hoping that Obama will reform some aspects of American society to China’s benefit.

“We think he will bring some reforms to some fields in United States society like education,” Min said. “College students pay attention to that because it may become easier for Chinese students to apply to American graduate schools. We also want to see whether there will be some sort of visa reform to make traveling between the United States and China easier.”

Despite the Chinese government’s concerns, some Chinese people have high hopes for Obama.

“Everyone wishes the new president will make Chinese relationships with America better,” Min said. “We haven’t seen Obama’s reaction. We don’t know if he will be good to China or bring hard times to China.”

Other students noted that the relationship between Obama and Beijing will depend on whether those in power in China acclimate themselves to his policies.

“Only time will tell how the Chinese government will respond to Obama,” freshman Chris Lo said.