Monday, November 18, 2013

Cato Calls to End the Fed…

By Bionic Mosquito

…objectives of targeting inflation and unemployment.  Fooled you, didn’t I?

I know it isn’t big news around libertarian circles that the Cato Institute is not libertarian, but every once in a while it is worth a concrete reminder.  In a commentary penned by Gerald P. O'Driscoll Jr., he asks: 100 Years Later, Was the Federal Reserve a Good Idea?

Now a clue to the answer may be found in Gerald’s professional background:

Gerald P. O’Driscoll is a senior fellow at the Cato Institute, and was formerly a vice president at the Federal Reserve Bank of Dallas.

I understand we all had to come from somewhere; while we all might have been born libertarian, the years of abuse and brainwashing in the indoctrination centers known as schools specifically, and in the brain-numbing bombardment by the mainstream media generally have taken a toll on many.  For most who find themselves in the libertarian camp, the journey was circuitous, unfortunately taking some for rides that, in hindsight, strayed from the good sense that God gave us at birth.

So maybe Gerald has returned to the wisdom that even a child possesses.  Maybe.

With the Fed in its centennial year, Janet Yellen facing confirmation hearings in the Senate, and questions swirling over whether the Fed will enact “tapering,” many monetary scholars are asking: Was the Fed a good idea?

Certainly, a clear and direct “no” won’t do – what kind of commentary would that be?  Over before it begins.  So Gerald highlights some of the bungles – attempting to establish his cred with the free-market community, I guess:

Not since the Great Inflation of the early 1980s has the Fed been so controversial. Its causal role in the housing boom and bust remains contentious. Other factors aside, the Fed was a poor overseer of the safety and soundness of the financial system. At best, the central bank was a passive bystander during the boom and early stages of the housing bust; it couldn’t even accept that we were in the midst of nationwide housing downturn.

…a look at the Fed’s unenviable performance over the past one hundred years shows how clearly it’s needed. On its watch, America endured the Great Depression, the Great Inflation and the Great Recession. Even excluding the Great Depression, real output has been no more stable than in the pre-Fed era.

In fact, the years of monetary stability under the Fed have been comparatively few.

Superficial as it is, is this not enough evidence to convict?

Certainly, the Fed has made many mistakes, but the current era of big government precludes any near-term possibility of abolishing it, as some would hope.

I guess not.

However, it can be improved. At a minimum, the Fed needs to be much more rule-bound. Targeting nominal GDP (the dollar value of all goods and services produced in the United States, not adjusted for inflation) would be one such rule.

I think I am going to be sick.
The above originally appeared at Bionic Mosquito.


  1. what about ending all lobbying?

    D.C. awash in contracts, lobbying wealth

    WASHINGTON • So much money to be had if you know where to look.

    The avalanche of cash that made Washington rich in the last decade has transformed the culture of a once staid capital and created a new wave of well-heeled insiders.

    The winners in the new Washington are not just the former senators, party consiglieri and four-star generals who have always profited from their connections. Now they are also the former bureaucrats, accountants and staff officers for whom unimagined riches are suddenly possible. They are the entrepreneurs attracted to the capital by its aura of prosperity and its super-educated workforce. They are the lawyers, lobbyists and executives who work for companies that barely had a presence in Washington before the boom.

    During the past decade, the region added 21,000 households in the nation’s top 1 percent. No other metro area came close.

    Two forces triggered the boom.

    Government relations has become so important to the bottom line of a modern company, Becker said, that it should be a required course at business school. The numbers suggest she’s right. Companies spent about $3.5 billion annually on lobbying at the end of the last decade, a nearly 90 percent increase from 1999 after adjusting for inflation, political scientist Lee Drutman notes in a forthcoming book, “The Business of America Is Lobbying.”

    1. so leave the power centers and "regulate" lobbyists? I suggest you go think about that a little longer.

    2. Geithner wasn't a lobbyist?

      Why Does the Media Ignore Timothy Geithner’s Disastrous Leadership of the NY Fed?

      By William K. Black

      Remember nine months ago when Timothy Geithner assured us that it was “extremely unlikely” he would take a position on Wall Street?

      The IMF and the NY Fed are far more private than public and they both exist primarily to serve banks. They NY Fed is owned by the private banks it supposedly examines and supervises and the banks elect bankers to act as the NY Fed’s directors (including until very recently the supposed “public interest” directors). They are not subject to U.S. government caps on pay, and in the case of the IMF the employees have their pay increased to compensate for the U.S. taxes they are supposed to pay (which Geithner did not pay for many years). Geithner’s disastrous “public service” at the NY Fed and the IMF made him a multi-millionaire at great cost to the public.

      But something else intrigued me as soon as I heard that Geithner was cashing in at Warburg Pincus – I remembered that I had debated a former leader of that firm about Geithner. (Details are here, here, here and here.) “Bo” Cutter was enraged that folks like me were criticizing Treasury Secretary Geithner and Obama’s decision to promote him.

      Warburg Pincus has had Geithner’s back for at least four years. The revolving door is powered by reciprocity, and Geithner had had Wall Street’s back for a decade. Transparency International decries corruption through crude bribes in developing nations, but the “perfectly legal” corruption of “advanced” nations like the U.S. differs largely in mode. Warburg Pincus was patient, but its leadership also recognized that it is never too early to begin sucking up to those in power, particularly if others are criticizing a senior government official for being too subservient to the elite bankers.

  2. Funny contradiction in the article.

    quote 1: "real output has been no more stable than in the pre-Fed era"

    quote 2: "real output (another immeasurable statistic)"

    The article reminds me of the exchange from "Wag the Dog" when they want to use the "national dish" as propaganda and someone points out that nobody in the US knows the national dish in Albania so the spin machine can make up whatever they want.

    Deny that national income and price inflation can be measured accurately and then make up whatever you want. Good one.

    1. You are such a fucking idiot. Because you are a lazy troll, you don't even realize that "quote 1" is what Gerald P. O'Driscoll Jr. wrote, and "quote 2" is written by bionic mosquito. They are NOT from the same person.


    2. Points taken away for inaccuracy and laziness in trolling. Points added for a Wag The Dog reference. Overall score: neutral.

  3. Doesn't mean anything. Have you ever listened to Kyle Bass?

  4. My comments;
    1. ALL central banks are created by and for bankers and politicians. Both seek an unlimited supply of money.
    2. the two mandates (steady value of dollar; low unemployment) were fake window-dressing to get political support from Congress and the masses
    3. the USD has lost 98% of its value (purchasing power) since 1913. This is rarely mentioned, even by opponents. Amazing!
    4. a key reason the Fed won't allow an audit is they probably don't have much gold in reserve. They claim 8,234 tonnes, but trading by the 1933 Exchange Stabilization Fund probably used most of it to suppress the price of gold. The USD will crash if the lack of gold is revealed !!

    It's all in my books 'Monetary Revolution USA' and 'Investor's Guide' at

    Regards, RedickD