Q: What is an issue that deserves more attention than it has received from candidates during the election cycle?
A: The Federal Reserve
The most important issue to be left out of this election campaign is the role the Federal Reserve has played and is playing in determining the economy’s direction. In 2006 George W. Bush appointed Ben Bernanke as Fed chairman. It is primarily in this sense that Bush’s decisions caused the problems that President Obama inherited. But here’s the rub, and probably the reason that the Fed’s policies are nowhere to be found in this presidential race: Obama reappointed Bernanke in 2009.
Americans voted for change and got more of the same instead. The Fed chairman and his predecessor, Alan Greenspan, for whom Bernanke served as a Fed board member, have become the bipartisan wrecking crew of the U.S. economy.
During the Greenspan/Bernanke regime of the early 2000s the Fed held interest rates to around 1 percent, as new money flowed through the banking system. This money flowed into the real estate industry, primarily because of political pressure on banks to abandon traditional lending practices. These investments were not backed by real savings but were being fueled by credit created out of thin air. The policies of the Greenspan/Bernanke Fed caused a real estate bubble that burst, taking large portions of the banking and financial industries with it.
In 2008, to “fight the recession,” Bernanke, following his mentor, started the process over again and adopted the Greenspan philosophy that there is nothing wrong with the economy that massive infusions of cash won’t cure. He continues that policy today, promising to print $40 billion of new money a month, distorting investment markets and preventing a sound recovery.
Where the next bubble will occur and when it will burst is impossible to predict. But it will occur, and it will burst. It is the invisible elephant in the room of this election.
This is a response to a question about whether there is a moral obligation to vote, asked by Everything Questioned. Check back Friday to see who wrote this response, find more views at EQ's homepage, and share your thoughts through comments or by submitting a 300-word response to Austin Baird.