Nonetheless, reader Harold wonders is that action would be a bit drastic. Harold writes ...
Hello Mish:Hello Harold. No I don't believe my solution to end the Fed is drastic.
Don't you think totally abolishing the Fed is a bit drastic. Theoretically if they could be stripped of any political influence and let the free market set interest rates their endless bubble production would be muted. I think their function of providing liquidity as a lender of last resort serves a useful function. Wasn't this the original purpose for creating the fed in 1913? I think their function has been bastardized by politicians and they have evolved into a tool of the government and the financiers. Free market capitalism can run the economy otherwise.
I hope you have a healthy happy New Year. Thanks for the great commentary.
Harold
Look at things this way: How can anyone determine the precise amount of steel, of oranges, of oil that the economy should produce?
If you do not think that is possible, then please tell me how a set of jackasses (or geniuses if you prefer) can possibly know where interest rates or the money supply should be?
In practice, the Fed has never once spotted a bubble or bust in advance. Nor does the Fed have any foresight in predicting economic growth. The Fed is perpetually overoptimistic as are economists in general.
Setting the price of orange juice would be far simpler than setting interest rates.
The Fed may have an alleged "function" but the result has been boom-bust cycles of increasing amplitude over time.
Mike "Mish" Shedlock
