The House Financial Services Committee witnessed a classic confrontation July 21 where the redefinition of a word was finalized. The confrontation happened between free market Congressman Ron Paul (R-Texas) and Keynesian Federal Reserve Bank Chairman Ben Bernanke over the definition of inflation. Congressman Paul noted that “inflation is an increase in the money supply,” as indeed the term had classically been understood.
Even the mass media is starting to take notice of the longtime cozy relationship that both the U.S. Treasury Department and the Federal Reserve Bank have with Goldman Sachs, a major Wall Street bank holding company and Democratic Party donor.
Capital lending firm-turned-bank holding company CIT has patched together another $3 billion private loan to avoid bankruptcy and try to complete the transition to bank holding company.
Federal Reserve Chairman Ben Bernanke is on a public relations offensive to persuade Americans that he has the economy well in hand, and that he has an “exit plan” for the Fed's inflationary monetary policies if consumer prices should start to rise precipitously. Bernanke does see a time when banks are lending more freely, and the fractional reserve system for banks would again put additional inflationary pressure on the economy.
Our politicians in Washington (especially the Obama administration) are following the economic policies of Federal Reserve Chairman Ben Bernanke, who made these economic predictions over the past four years (YouTube Video):
On July 14 California's bond ratings, already the lowest in the nation, took another hit. Moody's Investors Service downgraded $72 billion of the state's general obligation bonds by two steps, from A2 to Baa1. The new rating, just two steps above junk grade, will increase the costs of California's borrowing and deepen the state's financial distress. A few day earlier, Fitch Investors downgraded the state's general obligation bonds from A- to BBB, also two steps above junk grade in its rating system.
Congressional Budget Office Director Douglas W. Elmendorf gave a fiscal wake-up call to Senate Budget Committee members in testimony on July 16, noting that “the federal budget is on an unsustainable path — meaning that federal debt will continue to grow much faster than the economy over the long run.”
Congressman Ron Paul’s H.R. 1207, calling for an audit of the Federal Reserve, has attracted 270 cosponsors in less than five months. The Republican congressman's bill has received strong bipartican support, and approximately 100 of the bill's cosponsors are Democrats. Support for H.R. 1207 has frightened some of the Fed’s champions in the academic world, Fed officials themselves, and, of course, many of the Fed's friends in the financial world.
If you understand the relative superiority of the free market, none of our government's recent business bailouts will find favor with you. Yet, while Uncle Sam's involvement in the auto and banking sectors is bad enough, nothing is more bone-chilling than proposals to bail out media.
Sen. Judd Gregg, R-NH, knocked the spending plans of the Obama administration Tuesday, one day after the Treasury Department announced the deficit reached the $1 trillion mark at the end of June, just three-quarters of the way through the current fiscal year.