Texas Sen. John Cornyn and Rep. Kevin Brady wrote an op-ed that ran Jan. 12 in the Washington Times online about the role of the Federal Reserve, the commission created 100 years ago to study monetary policy for the U.S. economy. The authors hope to establish an independent, balanced, and bipartisan panel to collect evidence and make recommendations to Congress, which they plan to call the Centennial Monetary Commission, based on a new act of the same name.
The authors offer an interesting and brief accounting of the history of the Federal Reserve, and ask: “What is the best role and rules for the Federal Reserve to ensure America remains the strongest economy on earth through the 21st century?” And they posit that “Perhaps the best way forward is to step back and take a longer view of the institution. We believe the moment is right for an objective, comprehensive survey of the Fed's existing mandate and policy framework.”
Here are a few more excerpts: “In normal times, commercial banks convert excess reserves into new loans and investments, boosting the demand for goods and services. However, in recent years, commercial banks have been reluctant to lend and invest, and so the Fed's dramatic monetary expansion hasn't increased aggregate demand to the levels we might have expected. Indeed, despite the Fed's ‘monetary morphine’ stimulus to Wall Street, America is experiencing its weakest economic recovery of the postwar era. Admittedly, quantitative easing and extraordinarily low interest rates have clearly boosted stock prices. The S&P 500 Total Return Index adjusted for inflation has more than doubled since the official end of the recession in June 2009. America's middle class hasn't been as fortunate.”
To read the article in its entirety, go to the Washington Times online.