OPINION:
In 1978, Congress passed the Humphrey-Hawkins Full Employment Act, which forced the Federal Reserve to concentrate on stable prices and maximum employment. These two things are impossible to achieve simultaneously.
Now Congress has decided to infuse another $600 billion in federal reserves to try and bolster employment in the short run. This action will do nothing more than devalue the dollar, add to the already-bulging federal deficit and cause severe inflation. There will be too much unbacked money bidding on a limited amount of goods and services.
The result will be a recession or depression deeper than the one we have now. The government must stop thinking it can solve long-term, complicated problems with short-term solutions. This is a definite lack of foresight on the part of the leaders in the federal government. The Federal Reserve should stop trying to create maximum employment and concentrate on price stability. Once prices have stabilized, then businesses will know how much raw materials and labor will cost and be able to project future hirings while maintaining a normal profit margin. The average person and family will know how much to budget for housing, food, utilities, etc., and not be afraid to spend money on things they want or need. With price stability, long-term interest rates and inflation will remain steady.
These factors are critical to a consumer-driven economy. The more money the average person has to spend, the faster we will pull out of this recession. This isn’t rocket science, it’s basic common sense. If you force an agency, business or person to concentrate on too many avenues at once, it is doomed to fail. What is needed now is some linear thinking. We must call our representatives and let them know that they must repeal the Humphrey-Hawkins Act. Repeal the act and let the Federal Reserve do what it was chartered to do. Barring anything unforeseen, the rest will fall into place.
RIC WELLS
Wilton, N.Y.
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