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Which Is to Be Master?

State of the Union: The Fed continues to raise the question of whether it is the politics or the economics that have the upper hand in our political economy.

Jerome Powell

Veronique de Rugy’s excellent column this week, detailing the Federal Reserve’s dismal track record in promoting economic stability, gets to the heart of the problem with the Fed:

A responsible political class would pay more attention to an organization’s failures and significantly reform it. Instead, politicians will likely do what they’ve done in the past: give the Fed even more power to regulate the economy in ways that will only cause further harm.

In the words of the great political philosopher, Humpty-Dumpty, “the question is which is to be master—and that is all.” Do unelected economists or the People decide the future of the nation?

The “politically independent” Federal Reserve means, in fact, the politically unaccountable Federal Reserve. The past ten years in novel monetary experiments like quantitative easing and a good old-fashioned spending explosion have caused hideous distortions in the size and distribution of the money supply. In the process, they have further enriched elite cliques that already held disproportionate sway over American life.

The Constitution ultimately leaves monetary questions in the hands of Congress, and, by extension, the People. Auditing the Fed—as backed in 2013 by then-Rep. Ron DeSantis of Florida—is a step in the direction of sanity, of ending the disco era of American monetary policy. It is also a political winner. Even accounting for bias favoring the administration of one’s own party, most Americans do not understand or trust the Fed, probably in part because of its ever-growing mandate and lack of public accountability. Candidates, take note.


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