Wednesday, 2 May 2012

The Reserve Bank: Lock the doors and leave the building to the four-legged rats

The US central bank recently hosted two of its fiercest critics, inviting them to deliver their judgement on The Fed and the theory behind its actions and existence.

This is not because The Fed has adopted a policy of open debate. As Robert Wenzel’s account of his recent visit makes clear, that’s very  far from the case—it’s just that their might be one or two within the building who favour it. And it’s not like they know anything about Austrian economics—or want to.

Anyway, I reported Jim Grant’s visit a few weeks back, where he gave them a serious piece of his mind. For example…

In the not quite 100 years since the founding of your institution, America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard. I regret the changes and will propose reforms, or, I suppose, re-reforms, as my program is very much in accord with that of the founders of this institution. Have you ever read the Federal Reserve Act? The authorizing legislation projected a body “to provide for the establishment of the Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper and to establish a more effective supervision of banking in the United States, and for other purposes.” By now can we identify the operative phrase? Of course: “for other purposes.”

Grant crucified The Fed, explained why a gold standard is their best option, and suggested opening “the Fed’s first Office of Unintended Consequences.”

Well, Robert Wenzel just went one better, inviting his audience to join him in

walking out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats.

I highly recommend reading the whole thing. It’s both glorious and well-considered.

Send a copy to Alan Bollard with a cover letter offering the same advice.

1 comment:

  1. Cool. I love it when he asks the assembled economics graduates, "do you believe in supply and demand or not?"


1. Commenters are welcome and invited.
2. All comments are moderated. Off-topic grandstanding, spam, and gibberish will be ignored. Tu quoque will be moderated.
3. Read the post before you comment. Challenge facts, but don't simply ignore them.
4. Use a name. If it's important enough to say, it's important enough to put a name to.
5. Above all: Act with honour. Say what you mean, and mean what you say.