George Selgin - The Failure Of The Federal Reserve

By: LibertyPen

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Uploaded on 01/03/2014

Economics professor Dr. George Selgin (University of Georgia) examines the performance of the Federal Reserve by it own standards.

Comments (1):

By CryptoPunk    2018-01-12

>>It'll never happen, and if it does offfer any kind of freedom, it's the freedom to go back to pre-fiat boom and bust cycles of economic hell detached from modern macroeconomic theory.

Before the central banking era, the US banking system was made more fragile than it would have been under a free market by 1. Civil War era banking regulations that required banks to hold US bonds as reserves and 2. laws against interstate branching.

The former resulted in an unstable centralized money supply that fluctuated with the volume of outstanding US bonds and the latter prevented more diversified banks from emerging that could better weather localised shocks. Canada had neither of these mandates and consequently had a far more stable banking system.

There were proposals before the Fed was created to make the US financial sector more like Canada's, but the banking cartelists won the argument, and the Federal Reserve mandates were passed to cartelize the banking sector under a centralized hierarchy.

Also keep in mind that macroeconomic theory is just theory. It cannot be scientifically proven correct due to the complexity of the factors involved. Also keep in mind that there is an enormous financial incentive to popularize the idea that centralized control over the money supply is economically beneficial, and Economics is not immune to undue influence. Consider that the Fed alone employs thousands of economists, and consider the institutional biases the Fed and its shareholders likely have.

Even with all these forces at play, there's no macroeconomic consensus around your belief that free market banking is less effective than central banking.

A couple of good talks by George Selgin on pre-Fed era and the 100 year performance record of the Fed:

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