The Fed's not-so-golden rule
Feb 27, 2013 11:17 AM - RICHMOND, Va. -- A display case in the lobby of the Federal Reserve Bank here might express humility. The case holds a 99.9 percent pure gold bar weighing 401.75 troy ounces. Minted in 1952, when the price of gold was $35 an ounce, the bar was worth about $14,000. In 1978, when this bank acquired the bar, the average price of gold was $193.40 an ounce and the bar was worth about $78,000. Today, with gold selling for around $1,600 an ounce, it is worth about $642,800. If the Federal Reserve's primary mission is to preserve the currency as a store of value, displaying the gold bar is an almost droll declaration: "Mission unaccomplished." Today the Fed's second mission is to maximize employment, and Chairman Ben Bernanke construes the dual mandate as a single capacious assignment -- "promoting a healthy economy." But the Fed's hubris ignores the fact that it anticipated neither the Great Depression that began in 1929 nor the Great Recession that began five years ago. The Fed failed to cure the former, and today's unprecedentedly anemic recovery -- approximately 3 million fewer people are working than were five years ago -- has failed to cure the latter: If the workforce participation rate were as high as it was when Barack Obama was first inaugurated, the unemployment rate would be 10.8 percent.