What Is a Dollar?
When the House committee on financial services met in March to hear testimony from the chairman of the Federal Reserve Board, all eyes were on Congressman Ron Paul of Texas. After Republicans won control of the House last year, Paul acceded to the chairmanship of the subcommittee on monetary policy, which has direct oversight of the Fed. A physician by trade and a libertarian by conviction, Paul had emerged over a long career in Congress as the leading proponent of sound money; for more than 30 years, he had been waiting to play a central role in the nation's monetary debate. So eager was Paul to open up the topic that it took him some 670 words to get his question out.
The congressman noted the Fed's legal responsibility to strive for stable prices and full employment, and offered a review that illuminated the instability on both fronts since the early 1970s. He discoursed on the symbiotic relationship through which the Fed and the Congress have been facilitating government spending. He spoke about the importance of a "measurement of value," and asserted that the value of the stocks in the Dow Jones Industrial Average had plunged to eight ounces of gold from 44 in 2000. He reported that he was unable to find a definition of the dollar in the United States Code and wondered how the Fed could manage its task without a definition of the national unit of account. He therefore concluded his remarks with a simple question: "[W]hat is your definition of a dollar?"
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