Early this morning, I wrote a blog post criticizing South Carolina State Sen. Tom Davis for calling Federal Reserve Chairman Ben Bernanke a "traitor" and a "dictator" at the Ron Paul rally near Tampa this Sunday. Davis, a small-l libertarian Republican and Reason subscriber, then sought me out to clarify his remarks. Long story short: He's alarmed by the Fed's interventionist powers, thinks the economy and dollar are headed for collapse, he'd never spoken to a crowd that big before, and he was kind of "jacked up." A portion of our conversation:
Q: All right, so! I beat you up this morning...
A: No, actually, I was just coming here to tell you that...I don't disagree with anything you said in that piece, really.
The frustration is that when you talk about the Federal Reserve–and I understand the Federal Reserve's historic operations: they purchase securities, control the money supply, they put money in, put money out by selling Treasury securities–but in the last three years, what Ben Bernanke has done, and I guess this is what I was driving at, is quantitatively different, qualitatively different than any other Fed chairman, in that they create money out of thin air and purchase toxic assets from specific banks. They don't just make Treasury security purchases to increase reserves...so that they lower the federal funds rate, they don't do that. They're much more interventionist. [...]
And I guess my point was is, I don't think a lot of people are aware of the more interventionist role the Federal Reserve has played. Not only in the monetary supply–and I'm an Austrian, I mean, I believe in the boom-bust cycle, I believe that artificially lowering the rates you send the wrong signals to capital producers, and they overproduce, then you have the boom, and then you have the bust; I buy into all that, I think that's bad–but what Bernanke has done is just exponentially worse, because he's introduced an element of discretion into it. The Fed will decide what banks and what businesses it wants to help out, and which they don't.
And of course I was speaking metaphorically when I said, you know, "traitor," or "dictator." I guess my frustration is, what word, or what way do you communicate the facts in a way that resonates with people and then has them sit up and say "This is really hurting us"?
For the last year I've been going around the state, I don't have a primary challenge or a general election challenge, so I've had a chance to kind of go around and talk to people about the Federal Reserve, and monetary supply, and the fact that they've tripled the monetary base in three years, and that they're now out there, you know, like a rogue venture capitalist deciding who they're going to bail out. And so when you get up there and you start to talk about these things, and 10,000 people are around you, you kind of get jacked up.
A: But I don't disagree with you at all when you say...that the facts themselves are compelling enough where you don't need hyperbole and you don't need exaggeration....I agree with that.
Q: So that you know–I'm a terrible literalist.
A: Oh, so you're the one who pulled out the definition of treason in the Constitution! [...]
So this whole house of cards–I mean it's sort of like on the roadrunner, with the coyote, when he's running of the cliff and he's going like that and he's fine until he looks down, then he falls like a rock. At some point in time we're going to realize and look down, and we're going to fall like a rock.
And so I get up there in a setting like that, and especially in a crowd like that...it kind of starts to feed on itself. So my main point in coming here was to say: You're right, you don't win the debate by hyperbole...but sometimes you do need to use provocative language in order to really relay to your audience that this is something that I really think is serious.
I don't think he's a traitor. But I do think if you want to say monetary dictator I think that's probably more accurate. I wasn't trying to refer to him as a Mussolini or a Hitler or anything like that.