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The History of And The Debacle That Is ... The Fed · Conversations: Special Guests with Preston Scott

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  All right, it's time for the third and final hour at least for today
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  of the Morning Show with Preston, Scott and Preston. He's Grant Allen Jared
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  over there running the radio program this morning, and it's great to be with
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  you. It is Wednesday, May twenty ninth, show fifty one sixty eight.
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  It's the number on the program. So if you're not happy, go
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  to customer service. They'll give you a refund for everything you paid to listen
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  to the show today. We are pleased to have with us in the third
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  hour, Joel Griffith. He is with the Heritage Foundation. He's a research
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  fellow in the Thomas Rowe Institute for Economic Policy Studies. And Joel, welcome
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  to the program. How are you, sir? You and all thanks having
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  me this morning. I am here on important business with you, and I
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  needed someone that could surely explain to me and our listeners a little bit as
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  it relates to the FED. There have been discussions, there's a proposal being
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  advanced. I don't think much will come of it, but I think it's
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  worth talking about, and that would be the ending of the Federal Reserve system.
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  But let's first talk about its starting point, Why did we even establish
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  the FED? Well, the FED was established now more than one indred years
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  ago, ostensibly to actually iron out these big booms and busts that we had
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  in the years prior to the Fed's creation. But of course we know that
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  in one hundred and ten years since the Federal Reserve was founded, we have
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  continued to have booms and busts. Of course, we had the Great Depression.
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  I doubt many of us listening today we're alive for that. But we've
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  had booms and bustments, including the housing bubble of two thousand and six,
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  the second housing bubbles that we're in right now, and of course the Great
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  Recession of thirteen years ago. So the FED has largely been unsuccessful in its
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  mission to give us this steady economic growth. And over the past few years
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  we have seen the FED actually cave into political demands, printing trillions of dollars
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  to finance the reckless growth of government under President Trump and of course continued under
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  President Biden. And we're dealing with the inflation fallout of that. Now.
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  Why is it difficult or is it by design, Joel, for the average
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  person in America to really get their arms around the purpose of the FED and
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  the role it plays. It's very difficult, and we all look at our
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  Federal Reserve notes and I think, wonder, all, what does this mean?
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  Is this? What is this piece of paper? What does it represent?
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  I think most of us know that our dollar is no longer backed by
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  gold. It hasn't been backed by gold or anything of I need to have
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  a hard asset. For many years now, Congress has delegated its power over
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  the money supply to the FED, which has the power to issue currency at
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  will via the digital printing presence or the paper printing presence. It's called fiat
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  currency for that reason. It does it issue choose that currency by fiat.
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  You know, if you think of that word legislative fiat, well, that
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  was when a legislature or a king would just act because it chooses to.
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  That's what the FED does. Now. The FED acts independently of Congress to
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  determine what the total money supply will be. And I'll tell you what,
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  I'd rather have the FED doing that than perhaps Congress. But the Fed's decisions
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  have been dangerous as well, as it continues to inflate the money supply.
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  And I think that it's convoluted though for a reason. Politicians, and we
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  have these bouts of inflation, or we have a boom, or we have
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  a bust following one, they can point fingers elsewhere. They can point fingers
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  at the Fed itself. They can point fingers at businesses like Biden is doing
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  now, calling talking about greedy corporations driving up prices. But at the end
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  of the day, much of the blame lies at the hands of the Fed
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  itself, which funds the reckless government spending, and which has driven up housing
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  prices by buying up so many mortgages. Joel, I've commented over the years
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  that one of the things that helps people better understand the recklessness of our government
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  is that you know, when you and I get to the point of limit
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  on our ability to use credit, we're simply told no, and that we
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  have to make changes in how we spend what we have, We have to
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  pay down our debt in order to obtain more credit. The Federal Reserve basically
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  blows all of that up by doing what you're talking about, right, No,
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  exactly right. If you look at what happened a few years ago when
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  we had all the COVID spending well, the government to go ahead and finances
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  spending could have done well, they had one of two choices. They could
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  go ahead and raise taxes, which to raise taxes by that about imagine a
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  fifty percent tax like we're talking about payroll taxes and income taxes. There's no
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  way Congress would have had the political fortitude to do that, and of course
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  it would have devastated the economy immediately. While the other, the other alternative,
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  would be to borrow to raise those resources. Well, if the federal
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  government expanding by trillions of dollars, think about the we're talking about tens of
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  thousand dollars of dollars per family of four, the government would had to borrow.
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  If they would have had to borrow that just from the exist scheme,
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  resources in the private sector, interest rates would have soared immediately because the federal
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  government would have been gobbling up so much to the available private capital. Right
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  well, and that's why that's why Congress turned to the Fed to print the
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  money to buy the debt. It allowed us to escape the damage temporarily because
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  we didn't initially have a big boost of inflation and we didn't immediately have the
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  economy crash we're dealing now with the repercussion, but the fingers are being pointed
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  at alwhere, when, in fact, the problems that we're facing today'stem directly
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  from that decision by Republicans and Democrats to grow the size of government during COVID
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  and to rely on the FED to print the dollars. But three have gone
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  by now, and the blame is being spread elsewhere, allowing Congress really to
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  ignore responsibility for what they did wherever you may be, from Florida Sunshine State
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  to New York's forget New York, scratch that. New York's now hopeless.
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  At least the city is for the rest. We're your Morning Show, The
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  Morning Show with Preston Scott. Yeah, listeners all over the country because of
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  iHeartRadio. So we say thank you very much for listening. Always appreciate you
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  listening wherever, however, and we try to make that payoff with great guests
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  like our current guest Joel Griffith, who's with the Heritage Foundation. He focuses
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  on economic policy, and Joel, we were talking about the Fed. I
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  want to keep the discussion rolling. Here we hear the expression we heard it
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  a decade and a half ago. Or so too big to fail? Is
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  the FED at that point is I mean, you hear the proposal of Thomas
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  Massey of Kentucky to end it, to give it a year to shut down,
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  and before we get to the specifics on how to make that transition,
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  if we were to is it too big to fail? Well, I would
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  say at this point it's too vital in a way to fail. We have
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  a Fiat monetary system. There's not much chance that is going to be switching
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  back to a gold based or any other asset based system in the future.
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  This is how the world's great economies operate by Fiat. And really, when
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  you have a FIAT system, having a central bank as the lesser of two
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  evils. An independent central bank means the central bank is making the decision independently
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  of the political structure about how much money to create. Presumably that keeps inflation
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  from being worse than it otherwise would be. And I think that's true.
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  If you look at other economies such as Zimbabwe or Venezuela, where there is
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  really a politically intertwined central bank with the politicians, you see inflation even worse
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  because politicians have proven to be even more reckless when they have the power of
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  the printing press. Remember this is what is one of the reasons why the
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  Roman Empire dissolved when it did, because they were the sovereign whits constantly diluting
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  the value of the gold coins. Well, the same holds too in the
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  BIOT system. The less the currency you have, the lower the inflation rate
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  will be. And when politicians have complete control those levers, they have shown
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  that they're even more reckless. And until that's why, until we get the
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  federal spending under control, we're going to continue to see the threat of higher
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  inflation because there's always going to be the possibility that we're going to print to
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  get our ways out of it. It's just that that risk is less when
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  you have an independent central bank versus when you have the politicians controlling those printing
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  presses. Joel, we have about shay next two seconds left in this segment.
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  Ran a little long in the first one, so let me just ask
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  this. You've mentioned gold a couple of times. The goal, that is
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  the actual goal that's in possession of the United States, is it ours?
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  Well, the gold is in possession, it is largely owned by the private
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  sector. Thumb is owned by the federal government's thumb is owned by that's a
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  trabank. But when you say isn't ours, it is actually a great question
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  because you know, if you go back one hundred years, President FDR actually
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  banned the private ownership of gold. I believe that was unconstitutional, but yet
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  he still did it. So yes, I would say, the goal that
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  you have in your possession, it is yours. But you better hope that
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  our federal officials abide by a constitution that actually says you can't seize private property
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  abou judt compensation. Clearly you have a fundamental right to that gold is the
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  constitutional, police protected right. But our own government has shown that it will
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  abdicate those constitutional precepts when they can get away with it, which they did
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  under FDR. WSLA on your phone with the iHeart radio app and on hundreds
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  of devices like Alexa, Google Home, Xbox, and Sonos. So here
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  we go in Ihearts radio station. Joe Griffith is a research fellow with the
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  Thomas Rowe Institute for Economic Policy Studies at the Heritage Foundation. Our guest,
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  I'm going to put him in a very very nice position here in a second.
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  But first we've talked about Thomas Massey's proposal to end the FED best of
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  intentions, but not necessarily the right way to go. Well, I want
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  to be clear that in an optimal world, it would be a world in
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  which we did not have our monetary system controlled by the Thuttered Reserve. So
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  I want to acknowledge the fact that Senator Paul and Congress and Mapte have been
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  I would say, you thought leaders on this, and even though this legislation
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  I mean and I think they would acknowledge this as well. This is not
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  going to be something that is going to be implemented this year, but I
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  think it serves a very useful purpose of shining the spotlight on the FED,
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  because for far too long there has not been an acknowledgment that they have reached
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  so much economic havoc multiple times in our own lifetimes. But in the political
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  world that we live in, the reality is this is our monetary system right
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  now. There's stiat monetary system, and we have to look for ways that
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  we can actually I would say, diminish the amount of damage that the central
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  bankers can actually do. In Congress does have a role to play in that,
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  of course, because the FED is a creation of Congress. So what
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  can Congress, What are we likely to be able to get Congress to agree
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  on in the near future to stop the FED from repeating the mistakes, particularly
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  of the past few years. And I think there is a possibility, particularly
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  after this next election, and getting Congress to come to some sort of an
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  agreement on that. And there are a few basic things that Congress could do
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  to get the FED back and check. And you know, one of those
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  could be to get the Futteral Reserve out of the mortgage business. Why is
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  our Federal Reserve buying up trillions of dollars worth of mortgages. This has created
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  the worst, partially responsible for the least affordable housing market in our nation's history,
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  not just in the absolute terms of the price of a house, but
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  in terms of what does a typical house cause relative to a typical income.
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  It's never been this bad, not even close. And the Futteral Reserve bears
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  a lot of responsibility for that. And Congress also could tweak the rules by
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  which the Federal Reserve operates. Futter Reserve has a mandate from Congress, very
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  supposedly very simple mandate of stable prices and full employment what's time to actually revise
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  that mandate and tweak it in a way that diminishes the amount of discretion that
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  the FED has to try to micro manage this economy and diminishes the power that
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  the FED has to print dollars at will the finance ongoing federal government operations,
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  Joel. That leads to this question, then, is it should, could,
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  and should Congress limit the ability of the FED to print money? Well?
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  Absolutely. In fact, we've a heritage Foundation over the years drafted numerous
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  proposals of how that could look like. You know. One of those would
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  be to instead of having this stable price regimen, it would be to actually
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  have the Federal Reserve insure that the just ample money suppile. What that means
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  is that we would have the FED look more at what is the overall level
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  of spending India economy each year, and you want that to be increasing at
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  a steady trajectory. And if you would tweak the federal reserve mandate in that
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  way, what you would end up with would be less federal reserve intervention in
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  specific sectors, less federal government or federal reserve financing a government operations, and
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  you would actually allow us to benefit from falling prices in some sectors and productivity
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  increases. You know right now it's the FED is aiming for supposedly two percent
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  overall price growth. You're in a year out. Well, if we're actually
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  becoming more productive as a people, and we are almost each and every year,
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  if you're becoming more productive in a certain sector, that means that the
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  prices in that sector should actually fall. We have been robbed of those productivity
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  games by our central Bank now for decades, and Congress can actually step in
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  with some rules changes of how the FED operates to stop them from robbing us
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  in the future. Joel. A few years ago, Mark or Rubio famously
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  said, we don't need more taxes, we need more tax payers. I
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  feel like former President Trump hit on something when he lows or the tax rate
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  on businesses and corporations. It's not as low as it should be, but
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  he lowered it and he brought money back. There were more people paying into
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  the US tax coffers because they brought businesses and their their their money back into
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  the country in a short, quick, concise way. Is part of the
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  path forward. Doing just that, creating a system where I feel like we
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  have more than enough access to revenues for our country to operate. It's just
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  what we spend money on and reducing that No, exactly right. If you
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  look at revenue tax revenue as the percentage of the economy that has been relatively
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  stable now for many years, around seventeen percent. The reason why we're running
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  such high deficits is that federal spending as a percentage of the economy has skyrocketed
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  from around seventeen percent and now and some year's close to it's thirty percent,
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  and we borrowed the difference. So number one, yes, the problem is
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  not that we don't have enough taxes. The problem is that we actually have
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  too much spending. But second of all, yeah, tax side on businesses.
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  The worst form of taxation is taxation on income and on investments. And
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  that's because capital actually produces more capital. Yep. When you talk about a
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  capital gain, those gains are never are very rarely stored in the volved.
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  Those gains are actually invested into other businesses and that money multiplies. It's why
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  investors actually risk their capital elsewhere instead of locking it aside. And when you
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  tax that capital, that means there's less capital that is going to multiply,
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  and that affects not just a wealthy effects all of us because all of us
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  see our income's increase when are more productive. But if you take away to
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  capital, that's less capital for research development technology, which means even if you're
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  not paying a dime of personal income tax, you're actually going to be worse
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  off because your wages are likely going to be depressed going forward. Joel,
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  I got to have you back because we've got to talk about taxes one day
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  and a better way to tax people in this country or or not. I
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  don't know, but thanks so much for the time this morning. Thanks for
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  having me. Really appreciate it. Thank you. Joel Griffith with the Heritage
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  Foundation, my guest here on the Morning Show with Preston Scott