The Senate confirmed Christopher Waller to the Federal Reserve Board of Governors last week, leaving only one slot left open which is unlikely to be filled by Judy Shelton.* Any spot on the Board is significant; however, it is unlikely that Waller will push for any changes to the Fed’s policies.

The Federal Reserve Board directs the policy for the U.S. central banking system. Currently, the board is about as dovish as boards come. This means that they prefer low interest rates to try to boost employment without worrying about inflation. On the contrary, hawks tend to be far more vigilant against inflation, so they will keep interest rates higher to prevent an inflationary problem. Wallace is a dove. Adding another dove to an already dovish Board will not greatly affect policy. Dr. Haymond has already projected low rates forever. This is not because the economy will suffer forever “forcing” the Fed to reduce rates; instead, the Fed needs to ensure that inflation rates increase to perpetuate ever growing Federal debt!

Inflation causes numerous problems. Some simple research (which I encourage you to do) will produce pictures of mobs in Argentina, wheel barrels full of money in postwar Germany, or even currency used as wallpaper. At its core, inflation can distort economic signals. A small, constant amount of inflation is easy to deal with. If inflation is 2% every year, consumers and investors can adjust with relative ease. However, when cheap debt and nonstop printing presses pump too much money into the economy, it can be difficult to compensate for changing prices.

The US Treasury needs inflation badly, so it can default on its debt without actually defaulting. Additionally, politicians need low interest rates to “grease the gears” in the short term because the short term is the only term that matters to them. Getting re-elected trumps the long term needs of the economy. This sort of behavior is irresponsible, and it will ultimately lead to huge inflationary problems, misallocations of resources, and an ever hungrier debt monster. It is time for some tough love. The environment we’ve created to keep the stock market indefinitely soaring and debt cheap cannot be sustained because it is inherently focused on the now. To protect the financial security of America’s tomorrow, we need to tell our politicians to nominate and confirm more hawks. I’m not suggesting that we get rid of all of the doves. I think it is foolish to fill the halls of power with individuals who agree on everything, but right now we have no balance. It is time to bring balance to the board and let a few hawks fly.

*While writing this article, I found a commentator who said Shelton’s nomination is unlikely because, among other issues, she holds to the “mostly discredited” idea of the gold standard. This statement seemed like a bit of a stretch to me. Let me know what you think about the gold standard. I plan to do a future post about why I think it is a pretty good idea.