Remarks of Vice Chairman Brady Before Shadow Open Market Committee

Originally posted Tuesday, May 08, 2012

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So let us examine what monetary policy should be going forward. 

–– Vice Chairman Kevin Brady, Joint Economic Commission, April 24, 2012

From the Remarks of Vice Chairman Brady Before Shadow Open Market Committee

Not far from here on West 141^st Street stands the Grange, the recently restored home of Alexander Hamilton, our first Secretary of the Treasury.  After careful consideration, Hamilton devised a monetary system that revived a moribund American economy and fostered rapid economic growth.  As Hamilton did in his day, we must thoughtfully and clearly define the role of the Federal Reserve going forward.

A sound dollar is the sure and strong foundation for long-term economic growth.  A sound dollar creates certainty and facilitates new business investment and long-term job creation.  I believe the focused role of the Federal Reserve should be to protect the purchasing power of the dollar by maintaining long-term price stability.

Are there many other actions that Congress and the President must take to retain America’s economic preeminence for the next 100 years?  Of course.  We must:

• Make our tax system simpler and more internationally competitive by lowering marginal tax rates and eliminating distortions that pick winners and losers.
• Reform important entitlement programs—including  Social Security, Medicare, and Medicaid—to make them sustainably solvent so that they can continue to serve those Americans dependent upon them;
• Transform our regulatory system so that we can achieve our common goals—including a clean environment and safe workplaces—in more efficient, balanced, and less destructive ways; and
• Aggressively pursue trade agreements to open foreign markets to sell more American goods and services to the 95 percent of the world’s population that lives outside of our borders.

However, these reforms by themselves will be insufficient if the Federal Reserve fails to maintain the purchasing power of the dollar over time.  You only need look to the Great Depression of the 1930’s and the Great Inflation of the 1970’s to see that both price deflation and price inflation are twin evils that reduce real output and employment.

Learning from the past and looking to the future, Congress must select the right monetary policy mandate, maintain a Fed independent of political pressure, and hold the Fed accountable for the results.

So let us examine what monetary policy should be going forward.

Rep. Brady’s Sound Dollar Act continues to attract sponsors.  It, with its double measure of attention to gold, is a major step forward in the discourse.  And the invitation to examine what monetary policy should be going forward promises even greater steps just ahead.