Tag: Federal Reserve

Categories
free trade & free markets general freedom too much government

Bank on It?

marijuana, bank, California, California State Treasurer John Chiang, Federal Reserve

It took me a moment. And I assure you, I wasn’t high.

When I read that California State Treasurer John Chiang was considering a “marijuana bank,” my first thought was that he was talking about warehousing bud and leaf.

Well, no. That would be stupid.

So, maybe reporters and bloggers shouldn’t call it a “marijuana bank.” What these government officials are doing is trying to determine “the potential of a public bank to service the cannabis industry in California.”

A state bank, in other words. Not unheard of.

But would it be stupid?

Not according to Treasurer Chiang.* But his notion is not just about serving an industry that the federal government still tries to suppress — and continues to use its regulatory powers over banks to monkey-wrench. 

Chiang defends his move in part on anti-​capitalist grounds: “We see deepening public dissatisfaction and cynicism over the private banking system — a dissatisfaction that can be traced to the financial excesses of Wall Street, which triggered the worst recession since the Great Depression.”

Was the financial crisis the result of “bad actors” in the industry alone? No. The American banking industry is heavily regulated, the government-​created Federal Reserve is very hands-​on in its control of money and banking, and federal regulatory and financial bodies have exerted similar influence over housing industry financing for scores of years.

So of course a Californian politician wants to solve a government-​induced problem by creating more government.

That’s what’s stupid, if you ask me. 

This is Common Sense. I’m Paul Jacob.

 

* He’s going forward with a big study to “answer questions about costs, benefits, risks, and legal and regulatory issues, including the needs for capitalization, deposit insurance, and access to interbank transfers of funds.”

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Categories
Accountability free trade & free markets

The Fed Feeds a Scam

D. Stockman

Real and effective “anti-​establishment” ideas come from unexpected places. That is, they are unexpected if you read only the dominant media and its insider sources, or follow politics only during the quadrennial presidential farce.

Quite a few news junkies would be surprised at David Stockman’s critique of current Federal Reserve behavior and policy, for example. In “Why Ronald Reagan Is Rolling In His Grave: The Keynesian Putsch At The Fed,” he charges the central bank with having managed “an economic coup d’etat” by engaging in an ongoing wealth redistribution scam — shoveling wealth to the rich.

Stockman sees the confidence of Fed Chair Yellen’s macro-​policy micromanagement agenda as a scary case of hubris, of self-​appointed effrontery. “Yellen & Co believe they are in charge of virtually everything on the main street economy … based on nothing more than their own subjective and unexplained wisdom.”

Stockman is in high form, here. Yellen’s latest pronouncement, he says, is “unaltered Keynesian claptrap. It is the arrogant over-​reach of a model-​obsessed academic zealot who has no respect whatsoever for the real main street economy and for the historically proven truth that free markets are the best route to prosperity and higher living standards for the people.…”

Her policies, he claims, amount to “‘trickle down’ economics with malice of forethought.”

Does that sound Bernie Sanderish to you? It shouldn’t.

The case for limited government and against the Fed (and federal government management in general) are that it is modern unlimited government that serves the few at the expense of the many. Stockman is just restating very old wisdom.

Remind your Occupier friends of this. They are on the wrong team.

This is Common Sense. I’m Paul Jacob.

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D. Stockman

 

Categories
Accountability free trade & free markets government transparency

The Dark Guardian of Opacity

Sen. Harry Reid has his reasons that reason does not know.

Well, Nick Gillespie of ReasonTV (and .com) doesn’t know them. But he has his suspicions.

While the House has passed the Federal Reserve Financial Transparency Act, aiming to audit the Fed, Senate Majority Leader Reid balks at bringing the proposal up to a vote in Congress’s upper chamber. (Gillespie says it won’t happen, not while Reid has his say.)

In the House, both parties supported the audit — a majority of Democrats, and all Republicans save one lone holdout giving a Nay vote. But Reid, whose commitment to corporatism and opacity is well known, presumably fears the upwelling of good old republican values in the Old Man’s Club that is the U.S. Senate — Reid’s romper room for so many decades.

Egads, he must be thinking, even Senators Elizabeth Warren and Rand Paul agree on the need for some sunlight into the dark corridors of America’s bank cartel.

And they don’t agree about much of anything!

Gillespie spells out the whys of transparency. He also explains the basic context: “The central bank is explicitly tasked with the fundamentally incompatible duties of conducting stable monetary policy, promoting full employment, acting as a lender of last resort, and regulating the banks it works with. Good luck with all that.”

Who needs luck when you have power? Some do benefit from the current Old Boys’ system. They’re just not the general citizenry. Or republican governance.

A free society would have a very different banking and monetary system. Adding transparency might begin the process toward such a system.

Next step? Boot Harry Reid out of his cushy position of power.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets ideological culture national politics & policies

Greenspan’s Tarnished Standard

Long ago, before becoming Federal Reserve Inflater-​in-​Chief, Alan Greenspan advocated a gold standard.

The idea is that everybody pays for things in gold, a natural medium of exchange. Receipts for gold used for convenience in trade are “backed” and can be easily redeemed. With appropriate protections in place, politicians can’t dilute the value of money by printing more receipts or by shuffling phosphor dots on a computer screen.

But our world is very different.

At the Fed, Greenspan oversaw a lot of credit expansion, encouraging a horde of folks who couldn’t afford homes to take out mortgages. Any discussion of the financial crisis of 2007 – 2008, or why “we” “failed to predict” it, must discuss Fed policies and other government interventions.

Not, though, if you’re a former Federal Reserve chairman intimately aware of those policies and fully capable of grasping their baleful effects. Then you blather about “irrational exuberance,” or, in a new article for Foreign Affairs magazine, Keynes’s “animal spirits.”

Not a word about how monetary inflation spawns malinvestments that must eventually be washed away. Indeed, the best interpretation of Greenspan’s new book, or his appearance on The Daily Show with Jon Stewart, is that Greenspan is doing his utmost to deflect attention from his own disastrous record.

He’d rather have us believe that “free markets” failed in 2008, not — oh, no! — the policies he himself had pushed since obtaining his seat as head honcho at America’s inflationary central bank.

This is Common Sense. I’m Paul Jacob.

Categories
national politics & policies

Making the Rounds

The “trillion-​dollar” coin proposal hit big in the last few months, even garnering a smile, a wink, and a nod from Paul Krugman. The idea was for the government to mint a high face-​value platinum hunk of token money and sell it to the Federal Reserve — to weasel around congressional approval for raising the debt limit.

Something very much like it was floated by Populist and inflationist Bo Gritz back in the early ’90s, when he was running for the presidency.

Though the current president has dismissed the notion, people like it so much — perhaps because of its “just so goofy it might work” aspect — that the whole meme is still making the rounds.

As a technical matter, a one trillion dollar coin would probably be too unwieldy. If actually given the go-​ahead, the Treasury and the U.S. Mint would likely opt for smaller amounts, cranking out a batch of them — a big batch, to cover the federal government’s rising debt.

My modest proposal? Mint coins at the legal tender amount of $666 million each.

The effigy of Liberty could sport a 666 tattoo on her forehead, and a neat UPC symbol on her wrist, which she could hold up instead of a torch.

That would indicate, by commonly understood symbology, just how dangerous America’s debt really is, and how anti-​American the whole idea of the high face-​value coinage debt ceiling workaround would be.

Another way to go would be to carve each coin out of coprolite. Another fitting symbol for the last days of our fiat currency.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets ideological culture national politics & policies too much government

Paying for Agreement

How do you get a body of professionals to go along with your program?

Pay them.

It’s an old idea: He who pays the piper calls the tune.

The pipers are economists. The paymaster is not you, but the Federal Reserve. There’s a suprising amount of agreement amongst even disagreeing economists that the Federal Reserve is, on the whole, “a good thing,” a necessary thing, even an institution whose existence and rationale must not be questioned.

Shocking, but less so when you apply what is called “Public Choice” analysis to economists themselves. Assume that economists are self-​interested. Assume that they like to get paid. Opinions turn out to be somewhat elastic, even given some very hard facts. The results?

Don’t bite the hand that feeds you.

Nicely, a few economists bring this up, every now and then. Garett Jones on EconTalk did, reviving a letter monetary economist Milton Friedman wrote to researcher David M. Levy in the early 1990s. Friedman summarized the situation concisely, saying that the Fed

hires directly roughly half of all economists specializing in the field of money, and indirectly provides funds for a large fraction of the remainder. I have no doubt that is a major reason why the Federal Reserve, despite such a poor record of performance, has such a high public standing.

This also helps explain why there was a major shift away from laissez faire amongst economists. In the 20th century, the “worldly philosophers” developed a new labor market; they found that they could make a great deal of money working for government. And they don’t get paid for telling the government not to do what it wants to do, or to fire most economists.

This is Common Sense. I’m Paul Jacob.