Analysing the US Monetary System

July 6, 2011 - PRLog -- EconomyWatch: Is the current US monetary system Constitutional? Is it corrupt? What can be done to make it more honest or effective?

DioGuardi: Constitutional or not, from a technical legal point of view, the question should be, “Is it working?” Let me begin by saying that I do not believe that the Federal Reserve is corrupt, but I do believe that it can be made more effective. I am neither a lawyer nor an expert on our Constitution, but I do have a perspective on this. One of the most important aspects of our democratic system of governance is the separation of powers and the “checks and balances” that go with it. For those who feel strongly that the Federal Reserve should not be an independent part of government, where would they suggest that the important function of monetary policy dealing with interest rates, inflation, and the money supply be placed? As part of the Executive branch?

I think that from a practical and common-sense point of view, the answer is obvious. The public’s perception right now is that government is not working for the public benefit. Our budget policy, which deals with taxing, spending, and borrowing, is a mess due to political gridlock and partisan bickering, primarily motivated by reelection. As an independent “agency,” the Fed is not subject to our electoral system, answering directly to the public through Congressional hearings and its own public pronouncements. What needs to be done is to make the Fed more transparent through independent audits and annually published financial statements so that the public knows the size of its balance sheet, which is approaching $3 trillion dollars as of this writing. Other important aspects of its operations and policy making activities can be disclosed through public press conferences from time to time.

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