Questioning the Need for the Federal Reserve
At the New Republic's web site, Alvaro Vargas Llosa uses the federal raid on the Liberty Dollar as a hook to ask: do we really need a Federal Reserve? He namechecks libertarian economist greats Murray Rothbard and Milton Friedman on the way. An excerpt:
All in all, financial instability has been far greater since the creation of the Federal Reserve. What did the Great Depression teach us? Essentially that even with the best of intentions, it is impossible for the authorities to manage the supply of money in accordance with the exact needs of the economy……
The current housing market and debt market crises are in good part the children of the Federal Reserve. By cutting rates 13 times between 2001 and 2003, and then keeping them very low for years, monetary policy contributed to the housing bubble. That is not to say other factors–including financial instruments that made it difficult to see that the underlying foundation was not as solid as it seemed–did not play a part too. But, once again, the Fed has turned out to be a factor of financial instability.
In this context, Norfed's attempt to prove to the Fed that the market is ready to trust private currency backed by gold is a welcome occasion to take a second look at some of the economic institutions we take for granted.