Controlling the Fed

Excited about tomorrow's election? I'm less so after talking to Eric Cantor, R-Va. He seems willing to address only one of what I consider to be the two major economic problems facing our country, and that lessens my enthusiasm.

Unless a political asteroid hits the country tomorrow, Republicans will take at least 39 seats from Democrats and gain control of the U.S. House of Representatives. After the new Congress is seated, the parties will elect their leaders and Cantor likely will win the No. 2 spot as House Majority Leader. He might even upset top dog John Boehner, R-Ohio, to become Speaker of the House.

Just 47 years old, Cantor is a co-author-with Reps. Paul Ryan, R-Wisc., and Kevin McCarthy, R-Calif.-of Young Guns: A New Generation of Conservative Leaders. Elected to the House in 2000, he is currently the minority whip and has an 89 percent rating from the National Taxpayers Union and a 97 percent lifetime rating from the American Conservative Union. Except for his two votes in favor of the $700 billion bank bailout known as TARP, there's not much for conservatives to dislike about the pro-life congressman.

Republicans like Cantor have talked a lot about dealing with out-of-control federal spending, but they also need to recognize that we have an out-of-control Federal Reserve Bank (our nation's central bank). Most Americans understand the former problem but not the latter. The Fed's propensity to destabilize the dollar and the economy is the proverbial "elephant in the room" among conservatives.

When I spoke with Cantor at a political fundraiser last week, I was hoping he would indicate a willingness to pressure the Fed. I asked him what Republicans would do to get the Federal Reserve under control, especially since it has already pumped $1 trillion into the financial system and is poised to create another $750 billion to $2 trillion. Cantor told me that he doesn't know much about monetary policy and the Federal Reserve, but that he is committed to working on getting fiscal policy (taxes and spending) under control. In other words, he's ready to work on just half of our economic woes.

I'm sure Cantor is telling the truth about his unfamiliarity with the Fed. The Federal Reserve is a complex bank. Although self-defeating, its primary function is simple to understand: Keep inflation and unemployment low. The Fed's two main tools are the creation of money out of thin air to pump into the financial system and the withdrawal of money from the system. The subprime mortgage debacle, the stock market crashes of 2000 and 2008, the skyrocketing price of gold, the nation's pension problems, and the low rates of interest senior citizens are earning on their money are all caused by the Fed injecting massive amounts of money into the economy. These are very basic facts and I'm sure Cantor understands them.

But if Republicans gain power and fail to hold the Federal Reserve accountable, I think the American people will hold Republicans accountable in 2012 or '14. It's inevitable that senior citizens and the Tea Partiers soon will figure out that the Federal Reserve is the "other half" of our economic crisis.

And I'd be much more excited about tomorrow's election if GOP leaders like Eric Cantor were expressing more of a desire to deal with the Fed-induced financial and political tsunamis beginning to form.