The Flaws of the Fed

The New York Times has a David Leonhardt column asserting, "A politicized central bank is a first step toward runaway inflation." Well, since the Federal Reserve was created in 1913, the cost of the goods and services you could buy for a dollar in 1913 has soared to about $21. Or, to put it another way, the purchasing power of a 1913 dollar has fallen to less than five cents today, as Ron Paul writes in his book End the Fed. Seems like we've had some inflation under the supposedly depoliticized status quo. I distrust politicians as much as the next guy, and certainly as much as David Leonhardt distrusts them, but "politicized" can mean controlled by the politicians, or it can mean responsive to the voters as opposed to being unaccountable. A government responsive to the voters rather than unaccountable is a basic, core concept in democratic government. It's not clear to me why Mr. Leonhardt and other defenders of central banks insulated from politics think voters will favor inflation. Inflation is not popular; just ask President Carter, who was voted out of office in part because of it. The Leonhardt column does have a pretty good recounting of how the Fed missed the housing bubble.