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Reform or abolish?

It seems to be my job to call attention to papers by the other contributors to this site that they neglect to mention. The latest is Jerry O'Driscoll's "Central Banks: Reform or Abolish?"

  • As the paper notes, it is important to take a broad, institutional and historical perspective when considering the simple question re: the Fed, "Reform or Abolish?" For example, consider a world without the Federal Reserve arrives tomorrow. But the FDIC, SEC, SIPC, Fannie and Freddie, and bailout artists in the Treasury Department still exist. What has been accomplished?

    I'm looking forward to a closer read.

  • Richard Schulman

    Who will see to it that George Will reads Jerry O'Driscoll's important paper? Will, who should know better, writes in today's (10/18/2012) Washington Post that

    "Before the Fed was created 99 years ago, the U.S. economy was in recession 48 percent of the time; since 1913, it has been in recession only about 20 percent of the time. The Fed has done much good."

    Contrast this with a point that O'Driscoll makes in his paper:

    "Until the creation of the Federal Reserve System, the United States operated with the 
    national banking system. It had a number of flaws and has been much‐maligned. It has been 
    portrayed as prone to bank panics and crises in 1873, 1884, 1890, 1893, and 1907. Yet the 
    national bank era was one of the strongest periods of economic growth in the country’s history. 
    Salsman (1993: 86) argued that the 19th century crises 'were briefer, milder, and involved acute illiquidity, whereas this [20th] century crises have involved prolonged periods of recession and depression, widespread bank failure, and chronic insolvency.' The 21st century appears to be 
    following suit. 

  • MichaelM

    I'm curious whether Will's statement is using the 'this year there was deflation, therefore there was a recession' standard.

  • Richard Schulman

    Very likely, Michael. So I guess the document package sent to Mr. Will will also need to include George Selgin's "Less Than Zero
    The Case for a Falling Price Level in a Growing Economy."

  • Wonder if Will relied on data from here, and/or what it looks like on this question. Don't have time now, but …

  • abolishincometax

    It always surprises me that we cannot comprehend the banking panics prior to the 'creation' (I prefer 'imposition') of the Federal Reserve may have been caused on purpose in order to bring about the creation of a Central Bank? The large banks of the time may have suffered losses and smaller banks were wiped out or amalgamated, but they were eyeing being in control of money printing in their 50 year plan ahead, not the next 5 years or so. The same banks are still going strong today – if you call failing and bailed out as a strength – you have to admit being bailed produces the best return as any deal is guaranteed a full profit?).
    We have just witnessed several wars starting by creating a pretext for attack that proved to be false and the same tactic being used to provoke the Iranians and seems to have been used in every war prior to this. Vietnam (see Pentagon papers), WW2 (Border dispute with Poland), WW1 (Archie Ferdinand) etc.

  • MichaelM

    No domestic institution existed with sufficient power over the banking system to plan five years into the future with such detail, let alone 50. Pre-Fed recessions and panics weren't caused purposefully simply because no one had the capacity to fulfill that purpose. It's only after the creation of the Federal Reserve System that an institution such in America.

  • MichaelM

    That last sentence should read 'such an institution existed in America'.

    Brain fart.