The Fed’s Funny Money

Before the US House of Represenatives Subcommittee on Domestic Monetary Policy, Hearing on the Impact of Monetary Policy on the Economy, July 26, 2011


Today's hearing is the second in a series examining the relationship between Federal Reserve policy and the performance of the United States economy. Today we are receiving testimony from the Federal Reserve banks. Of the half-dozen Reserve banks we contacted, only President Hoenig was willing to testify in front of this subcommittee, and we welcome him here today.


Like many critics of the Fed's monetary policy, I fear that quantitative easing will soon return. Despite what we hear from the cheerleaders in government and in the media, the economy remains in a complete shambles. Unemployment remains high and seven million jobs lost during the recession have yet to be regained. The Federal Reserve has kept interest rates at or near zero for over two and a half years and pumped trillions of dollars into the banking system in a vain attempt to revive the economy. Yet even now after the failure of the zero interest rate policy (ZIRP) and quantitative easing have become readily apparent, we still hear calls for more stimulus, more easing, more lose money. Like any other government program, the solution for failure is to throw more money at the problem, never mind the fact that throwing more bad money after good in such instances has never succeeded.


More