Money in Bad Faith
The depredations of the Fed.
Jan 28, 2013, Vol. 18, No. 19 • By JUDY SHELTON
Productive economic activity requires a commitment of resources based on faith in the future; it’s inherently risky, but that’s the nature and genius of capitalism. Unfortunately, the Fed’s tactics for suppressing interest rates have brought about conditions antithetical to entrepreneurial capitalism: loose money, tight credit.
If we want to preserve the morality of a free-market system, we cannot permit our central bank to carry out monetary policy in ways that play favorites. It’s especially egregious that the Fed has become complicit in drawing off capital into the abyss of deficit financing; clearly, our central bank is catering to the political class, bailing out Washington itself through massive purchases of government debt obligations. Monetary policy today delivers the biggest benefits to the world’s largest borrower—our federal government.
If we continue to allow the Fed to underwrite deficit spending and inflict the resulting monetary distortions on the people who actually contribute real value to the economy, who live and work in the belief that saving is a virtue, we will witness the steady demoralization of democratic capitalism.
Judy Shelton, author of Fixing the Dollar Now: Why U.S. Money Lost Its Integrity and How We Can Restore It, is a senior fellow at the Atlas Economic Research Foundation and codirector of the Sound Money Project.
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