For one very brief second the libertarians at the Mises Institute and the very liberal Ralph Nader agreed on economic policy.
Fiscal conservatives have long argued that the poor do better under a system of unfettered capitalism where everyone is free to pursue their own economic “best” interests without government involvement. Liberals generally argue the opposite, claiming that the greed of the wealthy is more often used to harm the poor, and that without the government, the poor would be forced into slavery by the wealthy. We could argue the logic and we can show that this liberal nightmare scenario is simply fantastical… but that’s not the point of this dialogue.
No, I want to focus on the liberal argument with which fiscal conservatives can agree. Namely, that the Federal Reserve does more harm than good, particularly against the ordinary people it’s supposed to help the most.
In a recent op-ed for the Huffington Post, former Green Party presidential candidate Ralph Nader argued that the Fed was hurting America’s most vulnerable.
Dear Chairwoman Janet Yellen:
We are a group of humble savers in traditional bank savings and money market accounts who are frustrated because, like millions of other Americans over the past six years, we are getting near zero interest. We want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that we receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest. It doesn’t seem fair to put the burden of your Federal Reserve’s monetary policies on the backs of those Americans who are the least positioned to demand fair play…
On October 27, the Wall Street Journal headlined the latest rumors of twists and turns inside the secretive Federal Reserve: “Fed Strives For Clear Signal on Rate Move: As 2016 approaches, the central bank hopes to better manage market expectations.”
What about the expectations of millions of American savers? It is unfortunately true that we are not organized; if we were, we would give you and the Congress the proper signals!
Please, don’t lecture us about the Fed not being “political.” When you are the captives of the financial industry, led by the too-big-to-fail banks, you are generically “political.” So political in fact that you have brazenly interpreted your legal authority as to become the de facto regulator of our economy, the de facto printer of money on a huge scale (“quantitative easing” is the euphemism for artificially boosting the stock market) and the leader of the Washington bailout machine crony capitalism when big business, especially a shaky Wall Street firm, indulges in manipulative, avaricious, speculative binges with our money…
The Fed’s near-zero interest rate policy isn’t helping younger people with student loans (now over 1.3 trillion dollars), whose interest rate ranges from six to nine percent. It doesn’t help millions of pay-day loan borrowers or victims of installment loan rackets – mostly the poor – whose interest rates, rolled over, can reach over 400 percent!
Sadly, while Nader is right about some of the problems caused by the Fed, he gets the heart of the matter very wrong, blaming “private” and “unregulated” interests for the problems when he should be blaming government intervention and cronyism.
The Mises Institute piggybacks on Nader to lay out the argument against the Fed.
Home price growth and rent growth are at historic highs. Are we to believe that immense growth in rents and mortgage payments (the largest single expense for families) are a good thing for families? For people who already own homes, rising home prices are often a hurdle that can be overcome. But for people who don’t already own real estate, there’s little hope of buying one under these conditions. Surely, the Fed has played no small part in driving the homeownership rate in America down to a 30-year low. And again, if you’re retired: good luck. You’re gonna need it.
Yellen no doubt believes that wages are higher because of Fed intervention. But in a world of sky-high rents,real wages are in fact lower…
For more on how the Fed impoverishes the middle class while helping the rich, see:
“How Money Production Can Worsen Income Inequality” by Guido Hülsmann
”The Cultural and Political Consequences of Fiat Money” by Guido Hülsmann
“How Inflation Keeps the Rich Up and the Poor Down” by Guido Hülsmann
“The State Causes the Poverty It Later Claims to Solve” by Andreas Marquart
“How Fractional Reserves and Inflation Cause Economic Inequality” by Andreas Marquart
”Ten Reasons to Condemn Inflation” by Andreas Marquart