The Federal Reserve has decided to, yet again, apply a policy of quantitative easing to “remedy” the current economic conditions. Similar measures have been taken in the past, and with no positive effect. This policy too shall only end in failure. Quantitative easing, on the surface, may appear complicated, but it is not. The idea, simply, is that by putting more money into the economy so the woes will be solved. In this case, Federal Reserve Chairman Ben Bernanke hopes to create a “sustained improvement in the labor market.”
Ben Bernanke, along with most of the economists that influence government policies, is an adherent to the economic philosophy of Keynesian economics, originating from John Maynard Keynes. Instead of conducting their economics according to principles and certainty, Keynesians take a snobbishly modern view that economic matters are overly complicated. Apart from this absurd economic methodology, Keynesian economics also is also another front of collectivist thought. Keynesians argue for massive public works projects, tax and spend policies, large debts, central banking, and central planning. Essentially, they are the same as any other socialist or Marxist policy.
What is being implemented in the United States, whether in quantitative easing or some other Keynesian idea, has been tried and failed in Europe. But that was different, this is America! To the contrary, Keynesian policies have been implemented before in American history. Keynesian ideas were put into action by Franklin Delano Roosevelt via his New Deal during the Great Depression, yet it did not help the economy in the long term. Yes, it was a world war that would be necessary to pull our country out of the Great Depression, according to the Keynesians. However, It was not World War II that ended the Great Depression, but the loosening of New Deal policies after the war that brought the economy out of depression— even though the economy was not good immediately after the war ended. 62 million deaths (418,500 of which were Americans) did not create economic prosperity.
Furthermore, this instance of quantitative easing is not the first time it has been implemented. In fact, the name “QE 3” only denotes the third time quantitative easing has used. The Federal Reserve tried quantitative easing, and the only effect was greater inflation (a purely logical effect of quantitative easing).
While such stopping quantitative easing would be better than continuing quantitative easing, the government and Federal Reserve still have control of our nation’s currency and financial system. In a more general sense, halting these policies, contrary to liberty and the free market, is only part of the solution. To adopt policies of liberty and free markets, these government controls and constraints must be removed to take a more Austrian economical approach. What makes the Austrians different than other economic schools could be expounded on at great length, but it suffices to state that the Austrians advocate completely free markets.
Even in terms of currency this is true. F.A. Hayek, a beloved defender of liberty, argued at great length for a de-nationalized currency, meaning that currency is left to private individuals, not the government. This is a major piece in the puzzle of solving our monetary and fiscal problems. When currency is controlled by the markets, and not the Federal Reserve, these absurd policies of quantitative easing and fiat money (money backed with no silver or gold) would disappear. Also, there would not only be one currency, but many. In the inevitable times of economic downturn, this would ensure the entire nation’s investments are not invested in a single currency.
We must continue to push for a complete halt in these policies, and to bring the system back to money with value. One cannot know what places the political winds shall push our fragile boat, but we as lovers of liberty must always keep in mind the ultimate goal— liberty.