Flat Tax Forbes Right on the Fed

In this article, Steve Forbes writes, “The Federal Reserve should have two key tasks–and only two: preserving the integrity of the dollar and dealing vigorously with financial panics to limit unnecessary damage.”

I’m with him. He’s right about the missteps of the Fed under Greenspan. Maybe the bailout of Bear Stearns was necessary to prevent a global economic apocalypse, but this endless loosening of the money supply is madness. Coupled with increased global demand for virtually everything, printing dollars is driving inflation sky high (look at food prices alone). I know Bernanke is paying attention to this and it’s a tough balancing act with the economy slowing and the credit crunch still crunching, but he’s got to show some restraint.

So Ben, baby, don’t cut the fed funds rate next week. Let it be. And, come next time around, if the banks stabilize a little and all this cheap money get credit flowing again, start raising it. A little pain now is better than a lot down the road.

Two other things:

You’ve got to give credit to Bernanke. He was faced with nothing but unsavory options and chose wisely. I’m not in favor of a government bailout in general but in this case, he needed to put his finger in the dike or the whole dam would have collapsed. So, he did it. Ben, you’re a hero – for now – but don’t overdo it.

I’m not with Forbes on the flat tax. On the other hand, if we talk about a graduated flat tax – higher for the wealthy, lower for the poor, no loopholes, income only – I’m there.

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