I’ve expressed concern about QE3 and other decisions by the Federal Reserve about monetary policy, but I have also admitted that it’s difficult to know the right monetary policy because it requires having a good idea about both the demand for money and the supply of money.
But this raises a bigger issue. The only reason we expect the Fed to “know the right monetary policy” is because it’s been assigned a monopoly role in the economy. But not just a monopoly role, we also expect the Fed to be some sort of omniscient central planner, knowing when to step on the gas and when to hit the brakes.
And we also are asked to suspend reality and assume that the folks at the Fed will be good central planners and never be influenced by their political masters. Yeah, good luck with that.
With so many difficult – or perhaps impossible – demands placed upon them, no wonder the Fed has a lousy track record (as documented in this powerful George Selgin video).
So let’s ask a fundamental question. Is the Fed necessary? Are we stuck with a central-planning monopoly because there’s no alternative? Professor Larry White says no in this new video from Learn Liberty.
This is one of the best videos I’ve ever seen, so I strongly encourage everyone to share this post widely.
Professor White effectively demonstrates how private markets can replace the five different roles of the Fed. But his arguments are not just based on theory. He shows that the private sector used to handle those roles in the past.
And I especially like his point about how a decentralized market system would operate. Indeed, I would have stressed even more how such a system overcomes the knowledge problem that exists with a monopoly central planner.
Here’s my video on the Fed. I focus more on how central banks developed, but you’ll see some common themes in the two videos.
P.S. Here’s a video with 10 reasons to dislike the Fed.
P.P.S. If you want some Fed humor, we have a Who-is-Ben-Bernanke t-shirt, this Fed song parody, some special Federal Reserve toilet paper, Ben Bernanke’s hacked Facebook page, and the famous “Ben Bernank” video.
P.P.P.S. Professor White’s video shows how we can improve monetary policy, but let’s also be aware that there are proposals that would lead to even worse monetary policy.
[…] hard-core libertarians, the answer is easy. Just abolish the Fed and rely on the private sector to produce competing […]
[…] P.P.S. Here’s my video on the Federal Reserve, which also explains that there might be a good alternative. […]
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[…] P.S. A classical gold standard could block central banks from engaging in bad monetary policy, but returning to that type of system is almost as unlikely as a shift to private currencies. […]
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[…] Maybe it’s time to reconsider central […]
[…] Maybe it’s time to reconsider central […]
[…] I’m a big fan of the Learn Liberty videos on the Great Depression, central banking, government spending, and the Drug War. And the videos on myths of capitalism, the miracle of […]
[…] And I’m a big fan of the Learn Liberty videos on the Great Depression,central banking, government spending, and the Drug War. And the videos on myths of capitalism, the miracle of […]
[…] And I’m a big fan of the Learn Liberty videos on the Great Depression, central banking, government spending, and the Drug War. And the videos on myths of capitalism, the miracle of […]
[…] And I’m a big fan of the Learn Liberty videos on the Great Depression, central banking, government spending, and the Drug War. And the videos on myths of capitalism, the miracle of […]
[…] White also has a good video explaining why a central bank isn’t […]
[…] https://danieljmitchell.wordpress.com/2012/09/19/can-we-envision-a-world-without-a-central-bank/ […]
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@Contrarian Rex, if the Fed is private, then why does the POTUS appoint its board and chair? You are confusing cronyism with capitalism and then drawing the wrong conclusion that full-on socialism would fix it.
Great video!
@ContrarianRex
It’s actually you who is clueless. The problem is the government has created a monopoly supplier and mandates no competition. Like almost everything they do, they eliminate any competion because they don’t like being shown up as incompetent… If they didn’t mind, then why eliminate competition?
Free markets, libertarianism, mean exactly that – freedom to compete…
If you don’t comprehend this, try setting up and using a competing private currency, and you’ll then understand it’s the US government that tells you to stop at the point of a gun and will eventually throw you in jail.
What I don’t understand is: before central banking, why was there a single currency in the US? (or any other country, for that matter.)
After all, every bank was free to issue its own currency.
I guess I’ll have to study the history of this.
You libertarians are completely clueless.
First of all, the Federal Reserve is not a Governmental organization, it is a private corporate banking cartel.
Hence, it is not the govt that is centrally planning our domestic and global economy to economic neo serfdom, it is Private deregulated free market Federal reserve banking cartel. Governments are merely the collection agents for these private interests.
If you want a world without without centralized planning and a central bank, you must ironically have a national bank that issues debt (interest) free currency. HR 2990 would solve all our problems.