Reprinted from http://us4.campaign-archive1.com/?u=33e4ec877eed6a43863a4a92e&id=e0d4b5d7d6&e=3a26d871b2
Will Senator Rand Paul, misunderstanding the voices of the un-dead,
block the appointment of Janet Yellen to head the Federal Reserve Board?
No joke. Tea Party fave Paul told the Wall Street Journal he would have preferred Milton Friedman, the free-market fanatic, to the liberal-ish Yellen. But, as a stunned Journal reporter informed the Senator, Milton Friedman is, alas, some years dead.
Unbowed, Paul contends he is channeling Friedman from beyond the grave,
invoking the Nobel Laureate economist to support the Senator's quest
against Yellen's well-known commitment to easy money policies at the
Fed.
Paul has written, "One
need not be an economist or mathematician to wonder whether printing
money out of thin air is a sound way to help the economy."
You're more than correct, Senator. If you don't know why America is printing more dollar bills, then you definitely are NOT an economist NOR a mathematician.
As a former student of the late professor Friedman, I'm quite
certain that Milty would have been thrilled by Yellen's push to
main-line more greenbacks into the US economy.
Friedman's -- and Yellen's -- greatest fear is not inflation, but deflation, a disastrous fall in prices due to starving the economy of dollars.
Senator Paul moans that, since the market crash of 2008, the Federal
Reserve has printed $3.6 trillion and dumped these dollar bills, ink
still wet, into the financial system. Paul is waiting for the day when
the printing of all these dollars will suddenly cause the price of a can
of tuna to soar to $7,000.
But despite the Fed's smoking-hot printing press, the price of tuna is perilously close to falling. Price inflation today stands at a teeny-weeny 1.2%.
It's time for Senator Paul and daddy Congressman Ron Paul and their
followers in gold-foil hats to admit that adding trillions to the money
supply has not caused hyper-inflation. After a quarter-century of
hysterical warnings from the two Pauls, the hyperinflation spaceship
never landed and little green dollar men did not eat up the planet.
An Idiot's Guide to Gold-Buggery
As Friedman warned, there's something far worse than having to pay for a loaf of bread with bags of currency, and that's having to pay for a loaf of bread with a bag of gold.
Notably, the Tea Party, not the guys in the goofy wigs on Fox TV, but the real one in Boston in 1773, was formed principally to protest King George's re-imposing the Gold Standard on the colonies.
The colonies faced a crisis. Bricks of gold don't have babies; and so, when an economy grows rapidly as did early America, there simply is not enough money to represent that new trade and wealth because the currency is limited by a fixed and arbitrary amount of metal.
Here's why. When the money stock stays flat as production and
workforce grows, each dollar buys more of that production. Sounds
good? No way. A monstrous fall in prices and wages means workers and
businesses get less for their output and can't pay off old loans. To
simplify: When a farmer borrows $100 for land and seed, then sells his
corn for $50, the farmer goes bust.
The American colonies faced such ruin when gold-backed currency was
insufficient to fund our massive expansion. A revolutionary leader of
the time explained the insurgent solution, "Happy for us that we fell upon the Project of giving a Credit to Paper."
Happy days ended when the British Parliament counter-attacked with the
Currency Act of 1764 that, "renders our Paper Money no legal Tender."
King George, to shackle the States to the Crown's metal-based currency,
required purchasing a tax-stamp for each case of tea which had to be
paid for in His Majesty's "pounds sterling."
So the dissidents threw the tea into the ocean.
A century and a half later, after World War I, the British Parliament
did it again, re-imposing the gold standard. The US and most of the
world joined Britain in the golden noose. Economies strangled and
dangled. The Great Depression eased only when FDR, in one of his first
acts of office, rescued the US, setting the dollar free of gold and
letting fly the "Federal Reserve Note," created out of thin air -- just
like America itself.
And while your beloved Friedman did not care for the government caring
for people's welfare via New Deal programs, my professor did praise
FDR's printing press for expanding the money supply.
In today's hearing, Janet Yellen might remind the Senate of economist
J.M. Keynes warning about, "Madmen in authority, who hear voices in the
air, distilling their frenzy from some academic scribbler of a few years
back."
Senator Paul, if you are going to listen to the voices of deceased economists, at the least, listen carefully.