By Warren Davidson Economists John Greenwood and Steve H. Hanke ably sound the alarm in "The Money Boom Is Already Here" (op-ed, Feb. 22). Too many have looked away as the Federal Reserve prints dollars by another name: quantitative easing. While the authors rightly describe the profound implications of the massive surge in M2 from the money that has already been spent, they neglected to mention the implications for the pending $1.9 trillion in Covid spending that President Biden and many at Treasury and the Fed have requested. Follow their logic and understand the profoundly bad implications of an additional $2 trillion on top of the $4 trillion in prior Covid-rationalized spending. The Fed's creative accounting combined with profligate federal spending won't end the pain for Americans. It will grow the wealth gap, inflate asset prices, accelerate the growing gap between Wall Street and Main Street and imperil the U.S. dollar as the global reserve currency. Rep. Warren Davidson (R., Ohio) Troy, Ohio This letter appeared in the Wall Street journal

By Rep. Warren Davidson Activist investors unleashed chaos on Wall Street this week, nearly bankrupting hedge funds, juicing the stock prices of fading companies, and most importantly, exposing the two-tiered system of finance. In broad daylight, some of the most recognizable online brokerages showed the world that they believe in a free market only in theory. Robinhood, the app that democratized retail investing by letting users make commission-free trades, provides the richest irony. Now that main street America can aggregate market information and has the power to short stocks and buy options, the very firms that opened the stock market to millions have had a change of heart. It all started with a meme on Reddit's r/WallStreetBets subreddit. Amateur market watchers believed that hedge funds had undervalued the performance of brick-and-mortar GameStop, which hedge funds heavily bet against. Moving in concert, redditors and other retail investors bought the stock en masse, triggering a short squeeze that pushed GameStop's value even higher as hedge fund managers moved to cover their shorts, further inflating GameStop shares, even though the retail store has struggled. Covering the shorts cost hedge funds like Melvin Capital and Citron Research billions. For once, it wasn't Main Street getting squeezed. Amateur investors, so-called "dumb money," beat the pros in a system that hedge funds thought they had cornered. That was, until Robinhood channeled its inner Sheriff of Nottingham by preventing users from buying GameStop and others in the r/WallStreetBets basket of favored stock. It also tightened the margin requirements for buying the stock while encouraging users to liquidate it. While this may have been a more appropriate standard in the first place, their actions on this trade clearly benefit hedge funds. Meanwhile inside Wall Street, hedge funds scrambled to buy and sell the same stocks, readjusting their balance sheets to stem their own bleeding, while broker-dealers were simultaneously keeping retail investors from participating in the buy-side of the market. Despite this obvious interference in the market, some funds took a total loss on their positions. This raises a number of issues about market participation. Some retail investors approved for margin accounts were surprised to learn that margin accounts can include margin calls. When those accounts have insufficient funds, shares are sold to cover the call. Wall Street pros point to this lack of sophistication as a reason they should not compete directly with average investors. But, when Robinhood and TD Ameritrade stopped investors from buying shares under a thin veneer of paternalism and concern about the volatility, it is yet another roadblock for Americans who are actively trying to participate in a market they were told is "free and open." After lowering barriers to participate in the stock market, these online brokerages lifted the drawbridge and sealed the gates to retail investors.With the Federal Reserve keeping interest rates near zero, there's little incentive or reason for Americans to hold cash in traditional savings accounts. Over the course of the pandemic, the dollar has lost its value and buying power as the Fed devalues the currency. Even Wall Street pros have done everything possible to move out of cash and into other instruments. This has inflated asset prices, distorted markets, and poses related systemic risks to markets. Remember that most Americans are locked out of private capital markets, which are open only to accredited investors. "Accredited investors" are defined by the SEC as individuals with incomes over $200,000 for the past two years, have a net worth of $1 million, or have a position in high finance with a company that trades in unregistered securities. These regulations are supposed to be in place to protect investors. But this paternalistic approach creates barriers that most Americans cannot overcome and shuts off an entire avenue of investment. The House Financial Services Committee has already promised an investigation into the highly unusual practices of Robinhood and other online brokerages. Many critics have rightly raised questions about the cozy relationship Robinhood has with Citadel Capital, which facilitates transactions for Robinhood and also bailed out troubled Melvin Capital this week. I look forward to the discussion on this and related topics. As I see it, some clever investors identified a particular set of circumstances which allowed them to exploit Wall Street's overly-risky position. In doing so these retail investors transferred money from the hedge funds' pockets to their own pockets. This should be celebrated and encouraged as it shows that the markets are not exclusive but inclusive. We cannot let Wall Street insiders ban outsider trading.

By Warren DavidsonThe last thing the public needed this year was more political brinkmanship. In 2020, governments asked the public to stop working, traveling, gathering, and "just stay home." The goal was to "stop the spread" or "flatten the curve." The result is millions of lost jobs, thousands of delayed medical procedures, and diminished educational attainment for America's students. Now, on top of all this, Speaker Nancy Pelosi is steering Congress toward a disruptive government shutdown. To be clear, Congress had all year to hammer out an agreement on appropriating money for congressionally funded government operations. In a perfect world, Congress would vote on the various department appropriations one by one before Sept. 30, and then, work would begin on the next year's spending. This would avoid the now-annual tradition of releasing thousand-page "omnibus" packages just days before the government runs out of money. Methodically negotiating and voting on each appropriation would allow members of Congress to address narrower issues in certain areas where Congress spends our hard-earned taxpayer dollars. What happens instead is that Congress kicks the can down the road, avoiding tough decisions. Back in September, the House of Representatives passed a continuing resolution to avoid a government shutdown before the general election. A continuing resolution is a piece of legislation that maintains spending at current levels for a short period of time. This may have been prudent, but it was a step that was necessary only because Congress failed to stay on schedule to fund the government before Oct. 1. Last week, Congress passed another continuing resolution, extending the deadline by a week as the possibility of passing further coronavirus relief complicated already thorny negotiations. This is unacceptable. Most people must comply with deadlines or else face consequences. Students in school must turn in their homework on time. Hourly workers must show up for their shifts on time. Business owners must meet delivery deadlines and pay bills on time. Congress relentlessly files extensions to avoid making tough choices and pretends there are no consequences for the excessive spending or missed deadlines. It's high time the public demanded accountability from Congress. Assuming appropriators come to an agreement this week, the "deal" will have been brokered by only a handful of representatives. Outside of congressional leadership and the House Appropriations Committee, rank-and-file members of Congress will have maybe 24 hours to read thousands of pages. There is no room for debate. Amendments will not be accepted. It's a closed process dictated by a handful of people behind closed doors. With the deadline looming, leadership and the appropriators will send a clear message once they reveal the text of the bill: "Take it or leave it." Sadly, this power play to bankrupt America with excessive spending in a last-minute "omnibus" bill has been standard bipartisan practice. After wasting days and months, Congress will be filled with a sense of urgency. The forced dilemma is a choice to disrupt key government services by voting "no" or pass it and maintain the broken status quo. We should be clear, voting "no" is more of a rejection of the excess spending and this broken process than any one particular component of the deal. But, this year, the manufactured urgency is particularly rich. Congress had one of its least productive years in recent memory. A study by Quorum found this Congress to be the least productive in at least 40 years. Although the metric is the number of bills passed, perhaps the more relevant metric is spending. No Congress has spent more money, ever, than the 116th. The outlook isn't great for the 117th Congress, either. The 2021 congressional calendar only allots 101 session days next year, the fewest since 1933. So, we can likely expect a rerun of this drama next year. This is not acceptable. Our constituents deserve better and must demand a change to the broken status quo.