Republicans shouldn't mess with the Fed

WHEN the newly elected US Congress convenes next year - with both the Senate and the House of Representatives coming under Republican control - the policymakers of the Federal Reserve will probably be in the midst of a debate over the future monetary direction of the central bank.

The Fed already announced before the midterm polls that it would end its aggressive monetary stimulus programme - aka quantitative easing (QE) - a US$3 trillion experiment launched in 2008 after the financial meltdown and start of the Great Recession. It was an experiment of propping up the devastated markets and injecting money into them through an unprecedented massive programme of bond buying.

The Republicans on Capitol Hill - and in particular those affiliated with the libertarian Tea Party contingency - have been critical of the Fed's loose monetary policy which they bashed as "printing money", arguing that it amounted to major government intervention in the operation of the free market, in addition to the inflationary pressure it could ignite. In fact, leading Republicans such as former Texas Representative and libertarian icon Ron Paul have called for the abolition of the Fed and a return to the gold standard. At the minimum, they have called on Congress to strengthen its scrutiny of the Fed's monetary and …