Re: [Pen-l] I want to know

[Jim Devine <jdevine03@xxxxxxxxx>]

I forgot to add: Dan, if you want a good book on the Fed, read William
Greider's _Secrets of the Temple: How the Federal Reserve Runs the
Country_.

On Wed, Apr 1, 2009 at 8:20 PM, Jim Devine <jdevine03@xxxxxxxxx> wrote:
> Dan Scanlan wrote:
>> ... Today I watched an interesting video at
>> http://www.brasschecktv.com/page/585.html that gives a bit of history of the
>> banking industry. Once again I'd like to ask a stupid question. I realize
>> that many members of this forum have more important things to do on a daily
>> basis, but if anyone does take a gander at this film, I'd be interested in
>> knowing its flaws.
>
> I couldn't watch the whole thing (my wife started a phone conference),
> but here are my comments on what I saw. There are a lot of valid
> things in it, but they are commonsensical. But the stuff about
> Rothbard and the von Mises Institute at the start should tip you off:
> it's right-wing stuff. It also looks likes a "monetary crank" film:
> there are a lot of things wrong with the world (stagnant incomes,
> etc.) that can be solved by our monetary solution (the gold standard).
>
> They seem to imply, for example, that Social Security's imminent
> demise would be prevented by their solution. Luckily, SS is far, far
> from bankruptcy, so it doesn't need their solution. In fact, I'd guess
> that the "Austrian" economists (Rothbard, etc.) would like it if SS
> failed, since it goes against "free market" principles.
>
> They also say that inflation steals from our savings accounts. That's
> true -- except when it isn't. Sustained but moderate inflation
> eventually leads to higher interest rates which protect our savings.
> In the long haul, the "real" (inflation-corrected) interest rate isn't
> negative, as long as we avoid hyperinflation. A strong power like the
> US is quite unlikely to slip into the latter trap.
>
> The quote by Rothbard at the beginning about the Fed being not being
> responsible or democratically accountable is right on the money (as it
> were). However, these folks are not in favor of subordinating the Fed
> to democratic control. Instead, they want the gold standard, seemingly
> to make the Fed subject to "nature."
>
> They miss the fact that the Fed is largely subordinate to bankers,
> Wall Streeters, and a non-Austrian brand of conservative economics.
> This means that the Fed also has inflation-phobia, but not as strong
> as the Austries' version. The Fed's decision-makers know that mild
> inflation "greases the wheels of commerce" (i.e., is good for
> business) and that economic collapses like the one we're in right now
> justify taking inflationary risks as a solution.
>
> The Fed also hates the deflation that the Austries like (as when the
> economist says that he wants the value of money to _increase_ over
> time, a normal result of the gold standard). Since the Great
> Depression, serious economists have known that deflation can be really
> bad (making recessions worse).
>
> Even without a debt-deflation depression like the early 1930s,
> deflation is bad for debtors, as the 19th century populists knew.
> Maybe we could deal with that by getting rid of credit, but that's
> hard to imagine under capitalism.
>
> --
> Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
> way and let people talk.) -- Karl, paraphrasing Dante.
>



-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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