Last week, the Federal Reserve announced it was going ahead with “quantitative easing.” Chairman Ben Bernanke said that he’d be buying $40 billion dollars of mortgage-backed securities every month, no end in sight.
Now, the traditional way that the Federal Reserve influenced the money supply, economist Randall Holcombe explains, was via “open market operations by buying and selling government securities.” But this changed in 2008 with the $85 billion AIG bailout: “Since then it has engaged in continual bailouts of financial firms and purchases of non-government securities. . . .
The Fed has moved from engaging in monetary policy in a way that was neutral toward various businesses and industries in the economy to one in which monetary policy is targeted toward specific firms and industries. This current foray, specifically targeted at the housing market, is crony capitalism.
It’s actually worse. It’s crank policy, as the redoubtable Mr. Peter Schiff summarizes: “Ben Bernanke’s plan to revive the U.S. economy and create jobs is to inflate another housing bubble. That’s it. That’s what the Fed’s got. That’s what it came up with. As if the last housing bubble worked out so well for the economy that the Fed wants an encore.”
Our leaders are obviously desperate.
And out of control. George Will states that the Fed has gone far beyond “mission creep” — it’s “mission gallop on part of the Fed, which is on its way to becoming the fourth branch of government — accountable to no one and restrained by nothing, as far as I can tell, in exercising both monetary and fiscal policy.”
This is what forsaking limited government and the Constitution gets you: a sort of frantic idiocy in aid of politically connected speculators and financiers.
This is Common Sense. I’m Paul Jacob.