Thursday, November 18, 2010

What to do about the Fed

One of the biggest, if not THE biggest, issues facing us today is getting the budget and deficit under control and th economy growing again.

The Fed is trying to jump start spending through quantitative easing---but that's going to have the same effect as an alcoholic dealing with his problem by having another drink.

So what would be a better solution?

The best solution would be to End the Fed--but a more realistic solution may be to end the Fed's "dual mandate" of price stability and full employment and make its job simply the preservation of the value of the dollar.

Read more here and here.

What do you think?


Harold said...

What I don't understand is this idea that the federal reserve should be "independent". Independent of what? The cartel itself is a creation of government (& banks) and its reserve notes are given legal tender status.

I like this comment from "TimKern"

""Price stability" itself, far from being "sufficient," is a false god -- it assumes no innovation, no change in tastes or needs, no movement from one preference to another.

Manipulating the money supply causes business cycles. There is no way that it won't. The only things in question are the cycles' amplitude and frequency -- and we've got a doozey going on right now, which the central planners don't understand. (That's because they believe in central planning rather than freedom, markets, and sound money.)"

Also isn't price stability the same as price fixing? If so, can we not expect the same result?

HaynesBE said...

I think what it meant by "price stability" is the maintenance of prices in general, not specific prices as in price fixing. Even this is as "mandate" less than ideal but could be first step to ending the Fed especially if "price stability" is defined in terms of preserving the value of our money.