Bernanke Offers an Opening

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It used to be thought that under our constitutional order it was the Congress that was supposed to be supplying the oversight of the Federal Reserve. Congress, after all, created the Fed. But Chairman Bernanke used his remarks at the annual retreat at Jackson Hole to proffer his own oversight of the Congress. Namely that the Tea Party and the Republicans — he didn’t put it quite that bluntly — are causing problems by forcing the spending issue. This will be marked in a wonderful editorial due to be run out in tomorrow’s Wall Street Journal* under the headline “St. Augustine at the Fed.”

One of the points the Wall Street Journal makes is that Mr. Bernanke seemed to blame everyone else for our plight save for the Fed itself. Or, as the Journal put it, his remarks “sound like an alibi for the Fed’s own inability to midwife a faster recovery.” The Journal went on to note that the Republicans “have run the House for fewer than eight months. Mr. Bernanke has been Fed Chairman since February 2006 and has presided over 32 months of historically easy monetary policy in the name of spurring faster growth and avoiding deflation. What we have instead is a mild stagflation—1% GDP growth, 9.1% unemployment, and a commodity price bubble that has robbed middle-class real incomes.” Asks the Journal: “Is this John Boehner’s fault?”

Mr. Bernanke might argue, were he not so oracular in his approach to public life, that his remarks were not directed solely at the Republicans. Certainly there was a sentence in which he said that, “to the fullest extent possible, our nation’s tax and spending policies should increase incentives to work and to save.” We like that word incentive, though if he wanted to talk about incentives to save, why the Fed might have an arrow or two in its quiver. But how long can Mr. Bernanke go on issuing these long, learned comments without any reference whatsoever in respect of the collapse of the value of the dollar?

The value of a one-dollar Federal Reserve Note — what Lawrence Parks of the Foundation for the Advancement of Monetary Education calls irredeemable electronic paper ticket money — is now worth less than an 1,800th of an ounce of gold and, at one point in recent days, was worth less than a 1,900th of an ounce of gold. Mr. Bernanke keeps talking about how sanguine he is at the prospects for inflation staying under 2%. But as Congressman Ron Paul has been pointing out, the inflation numbers Mr. Bernanke cites do not correspond to what people are experiencing in the grocery stories and gasoline stations of the land.

Now is the moment for the Republicans to meet Mr. Bernanke’s political demarche head on. The place for this is the campaign trail. The arsenal of ideas is being stocked by individuals and institutions as varied as, to name but a few, the constitutional sage Edwin Vieira Jr., Robert Zoellick of the World Bank, the Nobel Laureate Robert Mundell, the American Principles Project, Lewis Lehrman and the Lehrman Institute, Grant’s Interest Rate Observer, and Forbes and the Wall Street Journal editorial page.

Ordinarily we’d be inclined to alarm when the chairman of the Fed enters the political arena. But in the current circumstances one can see it as an opportunity. An conference in respect of the dollar — how to achieve a stable unit of account — will be held in October by one of the ideas factories of the Reagan revolution, the Heritage Foundation. It all adds up to the chance to move the monetary question to the center of the political debate and chart a return to sound, constitutional money, the most important step American can take toward the return of jobs and growth.


* It’s up on the Journal’s Web site this evening.

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