Audit the Fed

A couple of links about historical efforts to limit the Fed's independence:  here and here.  The Fed enables the credit economy.  As the NYT article states, this sets up a perpetual battle between creditors and borrowers.  Low interest rates favor borrowers; higher ones, creditors.  Both sides of the market have incentives to influence or direct Fed policy.

The “Audit the Fed” debate is the latest manifestation of a conflict as old as the nation, between those who argue that a strong central bank improves economic stability, and those who see an overbearing government engaged in harmful meddling. 

Congressional Republicans are calling for restrictions on the Fed's ability to do monetary policy:

In an inversion of the historical pattern, congressional Republicans have criticized the Fed for printing too much money, arguing higher inflation will be the inevitable consequence. And they have put forward proposals to constrain the central bank. One bill, known as “Audit the Fed,” would authorize the General Accountability Office to review the Fed’s monetary policy decisions. Another approach, backed by the House Financial Services Committee, would require the Fed to publicly articulate a set of rules it intends to follow in making monetary policy, and then explain any deviations.

Rand Paul is one of those leading the charge to rein in the Fed.  But ultimately, a less independent Fed is more likely to cause inflation than not.  




We may not like the economic times in which we live.  But is reining in the ability of the Fed to do monetary policy the right way to change economic outcomes?