Chairman Secretary Chief Whip Chancellor

April 2008

“By allowing persistent declines in the money supply and in the price level, the Federal Reserve of the late 1920s and 1930s greatly destabilized the U.S. economy and, through the workings of the gold standard, the economies of many other nations as well.”

Ben Bernanke

With the exception of perhaps Congress’s authority to tax, few institutions of the United States government can negatively affect the economy of our country more so than the Federal Reserve. Empowered to provide a safety net for the banking industry, this quasi-governmental organization interjects artificial controls on the price and availability of money. Consequently, as with any attempt to bypass pure market forces, the “Fed”, more often than not, creates problems rather than averts them. Since its inception in 1913, major declines in the US economy can, in some part, be attributed to policy decisions made by the Fed.

The Federal Reserve’s capability of altering economic conditions is so great that mere mumblings from the Fed Chairman, hinting that they may take some significant action, can send the stock market into a freefall. Anyone remember “irrational exuberance?” In recent years, policy decisions by the Fed to provide ‘cheap money’ has resulted in the current ‘mortgage meltdown’, and a dollar whose value is one of the lowest in history. Rather than biting the bullet and letting the market unravel this mess, the Fed continues to pump funds into the system. If that isn’t enough, they are now in the business of bailing out private investment firms whose financial shenanigans have decimated the pension funds from the Kansas City Teachers Union to small Norwegian villages.

On the other hand, in the post WWII era, the Fed’s control on the money faucet has kept the United States economy on a steady uphill path, albeit with a few bumps. Through its policy decisions and actions, the Fed has smoothed out the wild economic swings that historically lead to long term economic crisis. On recent events, the sub-prime mortgage debacle is nothing more than a good news story on private high-risk investments gone bad, which has been overplayed by the warm-hearted media because it deals with peoples’ homes. The ‘bail out’, as it is termed, of Bear-Sterns may be a stretch on the role of the Fed, but again, this action has prevented what could have been a domino effect on the major financial firms – which would have been a real crisis. And the falling value of the dollar only really affects those (i.e. the Chinese) who have gobs of greenbacks lying around. As an added benefit, a declining dollar makes American goods more affordable, which in turn creates jobs and lowers the trade deficit.

The Chairman, whose opinion of the Fed is exemplified by her collection of Krugerrands stashed under the mattress, has called for a debate to settle the question:

Resolved: The Fed has Screwed Up Again.

The Debate will be held on Wednesday April 16^th, 2008 at the University Club, 420 Summit Avenue, in Saint Paul. The Chancellor will preside over drinks beginning at seven o'clock p.m. The debate will begin at half past seven. While there is no dress code for attendance, gentlemen who wish to speak must wear a tie; ladies should adhere to a similar sartorial standard. For those gentlemen who arrive tieless yet wish to speak, fret not: the Purveyor of Ties will keep on hand at least one of his quite remarkable ties for just such an eventuality. Questions about debate caucus procedures or about the John Adams Society itself may be directed to the Chairman at (952) 470-8090 or the Secretary at (952) 210-2448.