Thursday, September 20, 2007

"Bernanke Stumped by Representative Ron Paul"

Scott Reamer:

In today’s testimony before the house, Fed Chairman Bernanke was questioned by Representative Ron Paul in what was a remarkable exchange. Remarkable for how straightforward, lucid, and anti-statist the question was. In his questioning, Ron Paul stated:

"I want to follow up on the discussion about moral hazard. I think we have a very narrow understanding about what moral hazard really is. Because I think moral hazard begins at the very moment that we create artificially low interest rates which we constantly do. And this is the reason people make mistakes. It isn’t because human nature causes us to make all these mistakes, but there is a normal reaction when interest rates are low that there will be overinvestment and malinvestment, excessive debt, and then there are consequences from this. My question is going to be around the subject of how can it ever be morally justifiable to deliberately depreciate the value of our currency?”

His statements continued (about how much oil, gold, wheat, corn, etc. has gone up since the rate decrease) but the heart of his question was the following moral question: ...consciously depreciating the value of the USD has winners and losers (Wall Street/banks/the rich and everyone else), Mr. Bernanke. How do you constantly choose Wall Street over the rest of America?
I'd highly encourage CFRP viewers to read the rest here.