‘Crackpot economics’

The third part of the series on the Federal Reserve, âÄúThe Capital of controversy,âÄù epitomized ignorance, crackpot economics and selective memory. First, the entire argument for the abolishment of the Fed rests on the actions of not the Fed, but politicians! That the Fed attempts to stabilize the economy through open market operations has little to do with allowing politicians to do what they want and a lot to do with preventing these same politicians from doing even more damage. Instead of blaming the Fed for the war in Iraq and other terrible political decisions (truly a remarkably absurd point) you should blame the American people and the politicians they elected and we should be glad that the Fed is around in order to try to minimize the damage. I would remind you of the âÄô70s when the Fed, in order to stop the U.S. economy from rocketing into hyperinflation, choked the economy with high interest rates and so lowered inflation. Your column makes it sound as if the Fed is constantly inflating the economy, though they can (and they do) increase or lower the amount of money in the economy. You argue that we should revert to a âÄúprecious metalsâÄù standard for our economy. This doesnâÄôt make sense for numerous reasons. Why should the value of the dollar reflect the rate at which arbitrary metals can be dug from the ground? Why on earth would that seem to have any relevance to the price of American goods or services?! Second, you make no mention of the role that the gold standard had in massively increasing the destruction of the Great Depression. Without the ability to adapt to the monetary conditions of the times (because the value of the currencies was decided by some bizarre relationship between shiny pieces of metal) the industrialized economies were helpless to attempt to stimulate their economies. A modern Fed would have been much more useful. Also, you use the term âÄúgeometricallyâÄù when you should say âÄúlinearlyâÄù âÄî unless you are referring to Keynesian multipliers when you mean to refer to open market operations. In that case, you would be completely wrong, as most economic theory that motivates the actions of the Fed has nothing to do with Keynesian multipliers (perhaps this is what you learned on Wikipedia, dig deeper). Finally, you hop on the simple-minded bandwagon that a weak dollar is bad. Does that mean that American jobs are bad? Because a weak dollar means that people buy American goods which means that they pay American workers. I would ask you to not be so superficial in your analysis. It is irresponsible. John Mondragon University student