Calls to reform, audit, and even eliminate the Federal Reserve have been growing in recent years. We certainly call for an end to the Fed and I encourage anyone interested in monetary policy and the Federal Reserve to read Free Prices Now by ACC co-founder Hunter Lewis. Hunter is a scholar of the highest order and a remarkably successful financier. If you want to understand the sins of the Federal Reserve read his book.
But many people already understand the sins of the Fed and many of these people gathered in a counter summit to the party the Federal Reserve was having this week in Jackson Hole Wyoming. One of the people criticizing the Fed was Benn Steil who, believe it or not, is a director of international economics at The Council on Foreign Relations.
Regular readers of ACC already know this both because we often make the case against the Fed but also because, in our opinion our readers are just a particularly smart bunch. But that the Fed is no friend is a point which deserves to be made often.
The Fed is not on your side. It is on the side of the big banks. Always keep this in mind. In most cases Yellen and Company really couldn’t care less about you or me. But they care quite a lot about Goldman, and JPMorgan, and Citibank.
In 1937 after years of a meager “recovery” the economy slumped again as artificial economic props were taken away. The Great Depression was born anew. 4 years later we were in a global war.
Let’s see, depression, then mediocre growth underpinned by artificial economic stimulants, sounds pretty familiar.
This is what happens when interest rates are set by a politburo instead of by the market.
Well yeah. But sadly this is a revolutionary idea for many of the world’s old school Keynesian economists.
The key drivers for the increased inequality (as we have said many times before) are the financialization of the economy and the emergence of a truly crony capitalist system. The two are of course entwined. The cronies enjoy bailouts and bonuses from banks which get bailed out. The unconnected get to do the bailing. (In various ways.) That’s basically the gist.
Ole’ Helicopter Ben put this long emerging trend into overdrive. But don’t blame him for inflating the assets of the already wealthy while the rest of the country was left behind. And don’t blame him for waging a war on savers. (Basically the prudent middle class.) Nope, he’s not to blame at all for the gulf in the economy. That just happened. Ben explains that over the long term monetary policy is neutral.
Man, if only.
This bill is probably a step in the right direction, but the focus should be first on auditing the Fed under a bright burning magnesium fueled light. We need to know what’s really going on in the institution before we can chart the best way forward. Open the beast up. Let’s see what happened in 2008/2009 and during the QE binge. Then we can tinker, or hack away, or blow up as needed.
It should be noted that Senator Warren, who is co-sponsoring this legislation in the Senate with Senator Vitter, opposes an audit of the Fed.
They say “don’t fight the Fed.”
This has been especially true from an equities investment perspective since the Crash.
The question now though is how much fight is left in the Fed.
Many of our readers are probably aware that Townhall Finance regularly features our work. John Ransom, the editor there does an excellent job and we encourage everyone to check out the site if you have not visited. It’s a very good mix of free market thinkers from different schools. Though it is generally not “libertarian.”
That is why I was particularly pleased to see this article in Townhall. A new and broad political disposition is clearly emerging. Though many longstanding libertarians would probably take issue with some of the people calling themselves “libertarians” these days, what we see is clearly progress. In the face of a very activist government (going back long before Obama) and a renaissance of constitutional understanding (largely facilitated by the Internet) more and more people are actually embracing the concept of “live and let live.”
What is of particular note is that this paper comes from a Brookings Institution scholar. Brookings is generally liberal in its disposition.
I am not keen on the prescription. Notice that the author comes short of calling the Fed itself unconstitutional. But at least there is some criticism of the Fed coming from the lefty camp. The excuses for the Fed have gotten embarrassing of late.
The Federal Reserve, as we have noted, is the Prime Mover of crony capitalism. It is a politburo. It is a central planning committee. It is a tool by which the big banks are backstopped with the wealth of the American people. It should be audited. It should be opened.
This is what the dollar has done under the Fed.
In light of some of the questions asked recently on monetary policy I post this relatively short speech given by Ron Paul at the Cato Institute on the subject of the Fed.
Indeed it does. Gold is a little bit of power you can put in your pocket. It is a direct and ongoing challenge to the current system of fiatism. (And by extension crony capitalism.) Central Banks can’t print gold. Gold limits the power of the Fed and its brethren. Gold limits the power of the banks which suckle at the teat of central banks. Gold limits the power of governments to indebt their peoples. Gold limits the ability of governments to wage war.
Gold encourages discipline.
Is it any wonder why gold is often called God’s money and why some people despise it so?
End the Fed. But Volker at least had the guts to raise rates to insane levels and effectively crushed 1970s inflation. If we had sound money he would not have had to do that of course. (Nor would he have had the power.)
Of the 4 chiefs still alive Volker is my favorite. Or at least the one I dislike least.