Yeager on Bernanke and the Fed
In the September 2008 issue of Liberty, Leland Yeager writes, in a note on oil speculators:
Less often emphasized [as a factor for rising oil prices] is weakness of the currency in which oil is priced. Several years of too loose a monetary policy have been eroding the dollar's purchaisng power and foreign-exchange value, besides causing other disruptions. (I don't particularly blame Ben Bernanke and his colleagues, though; for, without hindsight, I wouldn't have known how better to operate the flawed Federal Reserve system.)
I can think of a couple ways to "better operate" the "flawed" Fed: (a) stop creating money; (b) shut down; (c) publicly advocate these positions.
Comments (3)
Jay D
That is a glib solution, but I wonder how it would work.
(a) stop creating money
What do you mean by that? Do you want money neither created nor destroyed, that is, a stable supply of money? If so, you would need someone to carefully balance the interest rate to target a stable value for some measure of money--MZM or whatever, which they can't do if they...
(b) shut down
How could the federal reserve be shut down gracefully?
I have a solution! (a) Target a stable money supply with interest rates (b) slowly raise reserve requirements to 100% while simultaneously (c) literally drop a steady supply of physical Federal Reserve Notes (preferably in my neighborhood) from helicoptors to offset the credit contraction.
Then shut down.
Presto!
Published: July 28, 2008 12:08 PM
Lowell Sherris
Jay D,
...you would need someone to carefully balance the interest rate to target a stable value for some measure of money--MZM
Actually, when money is gold (or gold backed deposit receipts) the money supply increases only by the amount of gold mined and decreases by the amount of gold lost (ship wrecks for example). Since this fluctuation is small compared to the money supply, there will be negligible inflation. Fractional reserve banking would be impossible Interest rates would be determined by the time preferences of lenders and borrowers.
How could the federal reserve be shut down gracefully?
The Fed doesn't do anything gracefully. Removing a bull from a china shop wouldn't be graceful either, but it's the only way to save any of the china.
Published: July 28, 2008 2:25 PM
Bruce Koerber
Dear Dr. Yeager,
I was a student of yours in 1985. I am not quite sure what you meant by the following: "I don't particularly blame Ben Bernanke and his colleagues, though; for, without hindsight . . ."
What hindsight are you speaking of? Why do we have to examine the data like an empiricist when the knowledge of the end-results exists a priori?
Are we looking to blame? To some extent because their ignorance has consequences that are criminal.
What we really want is to educate the ignorant and to tear down the institutions that promulgate fallacies.
Dr. Yeager, either through blaming or educating you are in a distinguished position and that requires something other than waffling, in my opinion.
Published: July 28, 2008 9:17 PM