The political attack on Ben Bernanke’s QE2 continues.
House leader Mike Pence and Sen. Bob Corker submitted legislation to end the Fed’s dual mandate of balancing employment and inflation.
Instead, they want to rewrite the late-’70s Humphrey-Hawkins act to mandate an inflation target for the Fed, dropping the employment part.
This new inflation target is aimed at QE2, and the Fed’s attempt to lower the unemployment rate by inflating the money supply and the price level. It’s a good idea, though I would prefer going straight to a King Dollar stabilization approach referenced to gold in order to capture inflationary expectations, and thereby guide the Fed’s interest-rate and money-supply operations.
But an inflation target does clarify the central bank’s role as a guardian of price stability, and moves it away from the all-powerful central-planning disease.
Meanwhile, in the short term, the threat of dollar decline has been temporarily mitigated by the Irish and European debt-contagion flare-up, which has caused a run into dollars and out of euros. Dollar-gold has fallen accordingly.