Ron Paul(R) wants to End the Fed. Elizabeth Warren(D) begs the Fed, along with Bernie Sanders(I) and nine other Congress persons who signed a Halloween dated letter to Fed Chair Jerome Powell(R), scrutinizing his intent to keep hiking rates.
Incidentally, a few days ago Sherrod Brown(D) also wrote to Powell pleading for market intervention. It seems those who normally benefit from the Fed are starting to feel the weight of the inevitable economic crisis ahead. Congressional requests to the Central Bank remind us this is not the America of the Founding Fathers.
We are writing to express concern and request additional information about the implications of the Federal Reserve’s (Fed’s) most recent economic projections, its intention to continue raising interest rates at an alarming pace, and your disturbing warning to American families that they should expect “pain” over the coming months as the Fed takes “forceful and rapid steps” to “get supply and demand back into alignment…by slowing the economy.”
Yesterday, the Fed did what most expected of them and raised rates by 75-bps.
The concerns from Congress are many, but what stands out are some of the quotes used in the letter, taken from a Washington Post article:
…a growing group of economists from the left and the right arguing that the Fed is braking the economy too hard.
Understanding the problem with the above is liberating to the mind. The problem begins with the use of the left and the right since they’re both ill-defined yet popular words.
Personally, “the left” invokes ideas of wokeism, progressives, socialist, the mainstream media, social messaging. But I’d also classify neo-cons and war hawks as the left, because they too feed off the government and embrace coercion . I’ve never been quite sure what “the right” is or how far right it gets. It’s confusing when socialists swear Hitler was far-right, considering he was a socialist dictator who forcibly implemented what is called “socialism.”
Arriving at a succinct definition, or any clear delineation between the left and the right is not easy. Even worse, what side of the aisle does one belong to if they just want to be left alone?
Once the problem with the left/right is exposed, a person is free to think along the lines of more pronounced ideas, such as individualism vs. collectivism, voluntary vs. involuntary, or capitalism vs. socialism/interventionism. One can start thinking like a praxeologist, concerning themselves with human action, to arrive at interesting conclusions like the most rational way to organize society is through a free and unhampered market.
Or one can understand that the belief in a benevolent central bank who holds a currency monopoly is an economic absurdity, no different than Keynes’ animal spirits or velocity of money. Of course, great societal harm is done through the Federal Reserve since the Fed distorts the price and profit mechanism, interferes with the structure of production, and causes the boom-and-bust cycle.
Economists may affiliate with a political party or hold personal ideas which generally classify as being left or right. However, as the most honest way to organize the means of production on a planet with scarce resources, where everything is bound by real-world factors such as the passage of time and stages of production, there is little room for an economic analysis considered left or right.
When Senator Warren and Co. cite quotes from the Washington Post like:
Moreover, as central banks around the world simultaneously pursue aggressive interest rate hikes “in a precarious economic experiment that has never been tried before,
…it shows how little those in Congress know about economics and the history of central banking. The Fed has been doing this for a long time, and until this latest iteration of America’s central bank is ended, the Fed will continue to be the primary cause of our recessions and depressions.
