Ben Bernanke has made worldwide headlines for the last week with his declaration that the Federal Reserve will print money like there’s no tomorrow in an attempt to keep interest rates low (the second round of quantitative easing in this crisis, or “QE2”). Reactions from informed observers have been largely negative. Jim Grant of Grant’s Interest Rate Observer says the Fed is debasing the dollar. The German finance minister called the policy “clueless.” Even Sarah Palin has figured out it’s a bad idea.
Bernanke is going to have big trouble in the coming months now that his nemesis, Ron Paul, will probably become chairman of the Subcommittee on Domestic Monetary Policy in the new congress. Paul’s most recent book is titled End the Fed, and sparks fly every time he has an opportunity to question Bernanke during the latter’s regular Congressional testimony.
Criticism of the Fed has become so mainstream (and intense) that the unthinkable has happened: an Establishment figure (the president of the World Bank) has floated the idea of going back to gold as an international reserve currency. This is nothing short of stunning, given the well known fact that bankers hate the gold standard.
Gold has many things to recommend it as a monetary unit, but one of the most important is the difficulty of producing it. This difficulty prevents governments from inflating the money supply, a commonplace policy condemned in Scripture (Is. 1:21-23), as Gary North pointed out way back in the 1970s.
A more recent treatment of the morality of money is found in Guido Hulsmann’s Ethics of Money Production, which relies on medieval scholastic thought to demonstrate the unethical nature of paper money. Highly recommended.