Betting Against the Fed

by Steve H. Hanke

Added to cato.org on August 21, 2009

This article appeared in the September 7, 2009 issue of Forbes.

The Federal Reserve is scrambling to convince the public that it is not a secretive institution that acts at the behest of Wall Street, but the public isn't buying the Fed's line. According to a Gallup Poll conducted in mid-July, the Fed received the lowest approval rating of the nine government agencies and departments evaluated — even lower than the Internal Revenue Service.

Trying to show the softer side of the central bank, Fed Chairman Ben S. Bernanke took us on a tour of his hometown of Dillon, S.C. on a 60 Minutes segment in March, and in July he fielded questions from newsman Jim Lehrer and an auditorium full of people for more than an hour in a televised town hall meeting.

Both events were carefully choreographed — and unprecedented. During his face time Bernanke explained many things, including the Fed's strategy for shrinking its balance sheet and withdrawing the ocean of excess reserves from the banking system. Unfortunately, he did not address my main beef with the bank: that it clings to a flawed inflation-targeting regime with a horrible history of monetary policy failures. READ MORE