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Sound Money Gains a Champion

Paul Ryan, good as gold.

Sep 3, 2012, Vol. 17, No. 47 • By JUDY SHELTON
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Ryan is also aware that Americans increasingly sense unfairness​—​unequal treatment​—​in the way monetary policy is conducted. Sophisticated investors and privileged financial institutions seem to be the main beneficiaries of Fed largesse, borrowing at cheap rates while savers earn virtually nothing. Equity markets have become subject to the pronouncements of Bernanke, -hoping for some hint of further “quantitative easing” to goose stock prices. Meanwhile, the amount of bank holdings of Treasury obligations and government agency debt has more than doubled this year over 2011, reaching an all-time high of $1.84 trillion. If community banks are now going the way of money-center banks, gaming interest rates on Treasury instruments rather than lending to businesses, it’s because the Fed has made that the more lucrative endeavor.

Our discretionary monetary policy has brought about a rupture between financial intermediaries and the actual engines of productive growth, with high finance operating on a different track than the organic economy. This is undermining growth prospects for the United States and the world; it is distorting the natural process of economic recovery by manipulating price signals. After all, the whole point of capital investment is to channel financial “seed corn” into productive economic enterprise that will yield higher future returns​—​meaning improved living standards. But the Fed’s activist policies are guiding those resources into government instead.

Monetary policy should not play favorites. And Ryan’s campaign to restore sound money is as much about reasserting the principles of equal rights and equal treatment as it is about reconnecting the value of the dollar to the real economy. “Our currency should provide a reliable store of value​—​it should be guided by the rule of law, not the rule of men,” Ryan notified Bernanke at a hearing last year. “There is nothing more insidious that a country can do to its citizens than debase its currency.”

It’s an expression of faith in our nation’s founding principles wholly consistent with Jefferson’s own view that the integrity of our currency is a reflection of our commitment to personal freedom under limited government​—​and that a reliable dollar is the only money unit worthy of the American idea.

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.

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