Modern TImes Call for Modern Methods of Economy

By: Justin Mahmud

America’s Federal Reserve is the organization
intended to make sure inflation does not become a
problem. Inflation is the general rise in prices
brought about to the increase in the ratio of currency
and credit to the goods available. The Federal
Reserve chairman Ben S. Bernanke believes that is a
problem for business owners to increase their prices
when more money is put into circulation. Mr. Bernanke
believes the recent setting prices presents,
“substantial uncertainties,” which can bring a large
amount of inflation. He also believes the one factor
the Federal Reserve should watch is labor costs.
Although they can not regulate labor costs, they do
have the power to increase or decrease interest rates
and even if economic growth is expected inflation
remained “uncomfortably high.” The Federal Reserve is
approaching inflation in the wrong way and should
address it’s direct connection with Laissez Faire
economics.

Adam Smith created the economic transformation of
Laissez Faire. Its’ purpose was to separate
government authority and regulation from small
businesses and how they are run. Although Laissez
Faire proved successful at giving the people more
power and taking some away from the government during
Smith’s day and age, this policy has not maintained
its’ effectiveness today. But who is to say that
Laissez Faire cannot be modified to fit the time. A
major issue throughout the history of America was
poverty. A simple solution would be to put more money
in circulation (can be done by increasing wages or
“labor costs” as Bernanke refers to as). The problem
with this is that private businesses always increase
prices when more money is in circulation. This is the
true problem that should be addressed because the only
thing that can possibly change this would be the
government, but they can not change the pricing of
business owners because Laissez Faire restricts their
involvement with public businesses. Laissez Faire may
have been a powerful economic transformation at the
time of Adam Smith, but it should be altered to fit
the needs of today’s people and address the issue of
inflation and poverty. By altering, measuring giving
the government some control in the regulations of
prices.