Photo: AP
One of the most amazing stories right now is the failure of either President Obama or Congress to address the monetary crisis. This is the crisis Joe Six-Pack feels when he fills his car with gas or fetches up at the supermarket checkout — or when he has a hard time finding a job.
Even as our money doesn’t seem to go as far as it used to just a few years ago, Federal Reserve Chairman Ben Bernanke keeps insisting that inflation is low. Yet the hottest story about Obama’s naming of a new Fed chief has been what a New York Times dispatch called the decision’s “gender undertones.”
The Times broke that “story” a few weeks ago. It was writing about the conflict between those who favored a man, Lawrence Summers, a former Treasury secretary, and those who favored a woman, Janet Yellen, the current Fed vice chairman. Summers withdrew from consideration Sunday, having lost the support of his own party, and it looks like Yellen is now the frontrunner.
No one that I know has a problem with a woman heading the Fed; it would be a dramatic crack in the glass ceiling. But where is the debate about the role of the Federal Reserve itself in creating the Great Recession and the crisis that has kept unemployment above 7 percent for Obama’s entire presidency? The figure would be far worse if record numbers of Americans hadn’t entirely given up on looking for work.
It happens that we are just now beginning to mark the 100th anniversary of our country’s central bank: It was exactly 100 years ago that Congress started to work on the legislation that created the Fed. There will be centennial events over the coming year; the central bank began operations in 1914.
At the time, the value of the dollar was fixed by law at a 20.67th of an ounce of gold. Today, the value of the dollar isn’t fixed at all — and the actual value of the dollar has collapsed to less than a 1,300th of an ounce of gold. That’s higher than the nadir a year ago, but it’s radically lower than the dollar has been under any previous president.
This is what we all feel when, say, we go to buy a tank of gas. Since Bernanke became Fed chairman, the price of an average gallon has soared 54 percent to $3.52, even while the value of the gallon of gas has plunged nearly 33 percent to 1/372nd of an ounce of gold.
In other words, it’s not the gas price that is going up, but the dollar that’s going down.
It’s not just gas. Over the same period, the monthly grocery bill for a family of four jumped 25 percent to $1,036, while the value of those groceries fell 45 percent to 0.79 ounces of gold.
And the average sale price of a new home rose 4.2 percent, but the value fell a staggering 54 percent to 257 ounces of gold.
Absent a dramatic turn of events, Bernanke will leave his successor with a dollar that is less valuable by far than any dollar ever left by any Fed chairman. In percentage terms, the plunge in the dollar’s value on Bernanke’s watch is the second most dramatic in history.
The cover for him to do this is a 1978 law called Humphrey-Hawkins, which gives the Fed the job not only of watching prices but of boosting employment.
How has that worked out? The Fed has been ballooning its balance sheet by billions — “not literally” printing money, Bernanke quipped before Congress; it’s now done electronically — and the unemployment rate is still stuck above 7 percent.
Congress has the chance to use the Fed anniversary to take a serious look at whether the Fed is working the way it was intended. The chairman of the Joint Economic Committee, Rep. Kevin Brady (R-Texas), is pushing a bill to set up a Centennial Monetary Commission. He wants it to be a serious, bipartisan group.
His colleagues haven’t yet agreed. It seems that Congress may prefer to have a central bank that will pump out the funny money to cover the deficits Congress lacks the backbone to control. This means that the only way to force the issue is going to be through Tea Party politicians and crises like the coming showdown over the federal debt limit.
At least until Joe Six-Pack runs out of gas.
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