"Everyone's trying to get out of Washington, and we're the only schmucks trying to get in."
--Julius Levinson (Independence Day)
John Mauldin opines that we likely won't see Weimar-style hyperinflation in the US because the 'independence' of the Federal Reserve from government reduces the chance that bureaucrats will be willing to destroy the currency in order to pay down debt.
Fed governors have families and communities like the rest of us, JM, reasons. Thus they will be reluctant to turn the dollar to confetti for political gain.
Perhaps we will not get Weimar-like hyperinflation. But if we don't, it will not be because of the Fed's celebrated independence.
It is a charade to view the Fed as an independant agency. The Fed chair is appointed by the president and routinely meets with and reports to politicians in Washington. Moreover, the Fed reflects a type of government structure that is the enemy of a republic, one shared by most of the agencies that report to the president. These people are appointed rather than elected, yet have direct responsibility for developing and implementing policy.
No matter how poorly these bureaucrats do their job, voters cannot 'vote the rascals out. This amounts to oligarchy rather than republic.
Ask youself this question. If the Fed was a truly an indepedent agency, then who does this agency work for? Precisely whose interests do the actions of the Fed protect? Where do the Fed's resources come from? Who is the Fed accountable to?
Check the evidence. Since the Fed's creation, the dollar has lost about 98% of its purchasing power (in the 100 yrs prior to the Fed's creation, the dollar actually strengthened). Easy credit offered by the Fed has driven massive debt and leveraged speculation.
Now, as the artificially inflated mountain of credit begins tumbling down, the Fed's actions get more extreme. Short rates effectively at zero. Monetizing debt by buying $trillions in govt and private debt securities.
If things don't turn around, is it reasonable to believe that the Fed will pack their toolbox and go home? Or, given the trajectory toward increasingly extreme action, will the Fed dig deep into the box for tools of desperation (a la Weimar)?
Were the US Treasury in charge of monetary policy, it is difficult to imagine that Treasury would be acting any more recklessly that the Federal Reserve.
position in USD, SPX
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If they want to really change things, the first person to fire is Bernanke, who is a disastrous chairman of the Federal Reserve. The second person to fire is Geithner. Everybody – everybody in the media who wants to go after the business community ought to start by going after the politicians who have been at the heart of the sickness which is weakening this country and ought to start with Bernanke, who has still not been exposed for the hundreds of billions of dollars.
And I’m going to say one last thing. I want to repeat this. Bernanke has in secret spent hundreds of billions of dollars bailing out one group and not bailing out another group. I don’t see anybody in the news media demanding the kind of transparency at the Fed that you would demand of every other aspect of the federal government. And I think it is corrupt and it is wrong for one man to have that kind of secret power.
~Newt Gingrich
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