With the 2024 election season already begun, a renewed debate is emerging over the future direction of the Federal Reserve. The Fed’s gargantuan money creation, and its up-and-down interest rates, have resulted in a dollar whose shifts in value have been behind the major crises of the past 20 years — including the worst inflation in more than four decades.
In a widely read Wall Street Journal opinion piece, Republican presidential contender Vivek Ramaswamy made a powerful case for a return to Federal Reserve policies of the 1980s-1990s, which were based on maintaining a stable currency.
Sound money with a value that doesn’t dramatically fluctuate will calm a volatile economy, encourage trade and investment and put the country back on a path to prosperity.
SHOPPERS STILL FACE HIGH GROCERY BILLS
All of this has resulted in a precipitous decline in the value of the dollar. Its purchasing power has dropped by more than 40 percent since the year 2000.
Central bank policymakers have forgotten the famous warning of economist John Maynard Keynes: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.” One result can be a spike in crime.
The link between inflation and crime has been demonstrated repeatedly in studies of many countries. High-crime nations like Brazil and Venezuela, for example, are also high-inflation countries. The New York City crime wave taking place right now is often compared to the “bad old days” of the 1970s and early ’80s, the era known as The Great Inflation.
Central bank policymakers have forgotten the famous warning of economist John Maynard Keynes: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.” One result can be a spike in crime.
Not only does this damage commerce. People who can no longer pay their bills see others with investments and businesses benefiting from Fed-created dollars and appearing to get rich. The link between effort and reward is severed. Resentments flare that can stoke criminal behavior.
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The Fed’s answer to the inflation dysfunction has been to hike interest rates. And, indeed, inflation has dropped since its 9% peak in June of last year. But history has shown that, sooner or later, inflation and its ill effects — including crime — will come roaring back unless steps are taken to stabilize a currency.