This is the Cato Daily Podcast for Friday, November 20th, 2009.

I'm Caleb Brown.

Escaping the inflation that likely awaits the United States money supply will be costly.

It will mean public support of Federal

Reserve focused on the long term and the willingness of politicians to accept

inevitable political consequences sooner rather than later.

Alan Melzer, professor of political economy at Carnegie Mellon University, says history won't

look kindly on the United States without significant changes to make the Federal Reserve and Congress credible once again.

We spoke following his talk at Cato's 27th annual monetary conference held yesterday.

Is it possible for the Fed to rise above politics and do what you think needs to be done?

Well, Volker was able to do it, but it requires public support.

I mean, this is a democracy democracy and Congress has a lot of

influence on what the Fed does. I mean the Fed is the agent of Congress so it's not

independent in the sense that the European Central Bank is independent.

That is, there is no Congress that has direct control of the European Central Bank.

There is a Congress and they have the authority to coin money and regulate the value thereof under the Constitution

and the Fed is their delegated authority. So the Fed has to be concerned about what Congress does and it is.

You talked about this changing definition of Fed independence.

What do you think it ought to mean and what does it mean?

What it ought to mean is that there's a rule for monetary policy and the Fed has to stay within that rule.

And if they don't stay within the rule, they have to offer their resignations or an explanation of why they violated, deviated

from the rule.

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