The Fed Bumbles Along

Judy Shelton writes here about ongoing Fed monetary policy and its rather obvious flaws. I say obvious because the flaws are obvious to me. But maybe they are not nearly obvious enough to Americans in general.

Anyone paying attention over the past 24 months or so surely has no reason to have even a slight bit of confidence in the Fed. It is the Fed that caused the so called "asset bubble" (translation; malinvestment in subprime mortgages and commercial real estate). Yes, the Fed had help from Congress, but nonetheless, the Fed is the chief culprit, controlling as it does the nation's money supply.

Long ago, Milton Friedman explained why the Fed is a menace to the economy. Discretionary monetary policy is a ruse, a sham, a con game, and destructive. History --- including recent history --- shows this truth without equivocation. Yet, on we go, pretending that the Fed has some special crystal ball and some magnificent benevolence, able to conduct monetary policy (in secret of course) for the benefit of all.

If some one of the glorious Fed apologists who call themselves economists could explain to me why the price we call interest rates is a price that should be under the control of the Fed, I would be happy to listen. Any decent student in ECON 101 understands that price controls benefit some and hurt others. See if you can guess who the Fed benefits through its manipulation of interest rates.

Money is not real goods and services. Inflating the money supply does not cause real goods and services to expand, but it does benefit people who get to spend the new money first. See if you can figure out who gets to spend lots of the new money first when the Fed increases the monetary base. If you came up with the federal government as an answer, good for you. If you didn't come up with that answer, better luck next time.

See, also, if you can figure out who benefits from access to money at a near zero rate of interest, but turns around and lends that money to businesses and consumers at rates of interest closer to 10%. Now there's a real puzzler. The only puzzle I see is how so many Americans continue to be conned by the Fed and the banking system it heads.