Rep. Warren Davidson (R-Ohio), the co-chairman of the Congressional Sound Money Caucus, is warning that the Federal Reserve’s policy of low interest rates carries the risk of debasing the dollar and “undermines the value of money.”
Davidson, in an interview with The Epoch Times’ “American Thought Leaders” program, also said that loose monetary policy fuels the disconnect between people who have a large part of their net worth in marketable securities, and ordinary workers with limited exposure to markets, or “people whose only recourse to wealth is labor.”
“As the monetary supply is increased, liquidity on Wall Street has increased massively,” Davidson said, adding that the benefits of artificially low interest rates effectively bypass many Americans.
“Where’s the return showing up? It’s showing up in the structured credit market, where people with access to that market, large hedge funds mostly, can trade intraday, and they get yield that isn’t available to retail investors, that isn’t available to retirees and savers,” Davidson said. He added that easy money policies effectively lock “mainstream, everyday Americans out of that access, unless they happen to have their net worth tied up in marketable securities in large funds.
“The bottom line is that the Federal Reserve, enabled by Congress, is printing money and it undermines the value of your money,” he said. “If you’ve got your wealth in cash, that cash is being destroyed by printed money,” which he called a “hidden tax.”
Davidson said the solution is to “work toward sound money,” by way of a monetary system that addresses current deficits.
“You can’t inflate your way out of this,” he said, referring to the notion that the effects of massive deficits and public debt can be overcome by printing money.
On Oct. 28, CME Group, the world’s largest futures exchange operator, said third-quarter profits plunged 35 percent as the ultra-low interest rate environment cut demand for some of its top products.
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