Obi-Wan Speaks

From the halls of Congress to the pages of the Wall Street Journal, we’re getting an earful.

Fed chairman Ben Bernanke spoke to Congress yesterday about how the Fed intends to remove the piles of cash they’ve been throwing at our economic problems. The short answer is, they’ll raise rates. But not any time soon.

The larger question he’s facing is why we need an independent Fed at all. After all, the Constitution clearly calls for Congress to regulate our currency.

But Congress is subject to short-term populist pressures, while the benefits of lower inflation, like a conservative family budget, are long-term. So they’ve delegated monetary policy to the Fed. Call it the allowance syndrome: if the kids could vote themselves a higher allowance, the family won’t have enough set aside for heating oil next winter.

But that approach is an insult to our intelligence and maturity. There’s something distasteful about Congress protecting itself from voters by hiding behind its own law. At least now, with Bernanke speaking, we can understand what the Fed is doing.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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