Monetary Policy

For years the Federal Reserve and many other central banks around the world have declared that a key element of monetary policy is the targeting of a two percent rate of annual price inflation.

There is little that happens in society in general and the market economy in particular that most on the political “left” do not think needs more government intervention, regulation, and redistribution to make “better.”

Forty years ago, on October 9, 1974, the Nobel Prize committee announced that the co-recipient of that year’s award for economics was the Austrian economist, Friedrich A. Hayek. Never was there a more deserving recognition for one of the truly great free market thinkers of modern times.

For more than a decade, now, Federal Reserve policy has been guided by the fear of one economic bogyman: the presumed danger of “price deflation.” The fear is unfounded and the inflationary “solution” only leads to disaster.

Today’s economy is driven by Washington in more than just determining the location of Maserati dealerships. We see the ramifications of current government policies in numerous obvious ways. Make full-time employment more expensive with required benefits, and suddenly there are more part-time jobs; provide ample benefits and low eligibility standards for defining disabled workers, and suddenly there are more long-term unemployed going on SSDI; keep interest rates at zero, and suddenly there are more elderly workers; end unemployment insurance, and suddenly you see people accepting jobs they were reluctant to take; and as we’ve seen at the state and local level, raise the minimum wage, and suddenly teens are struggling to find work.

Forty years ago, during the week of June 15-22, 1974, the Austrian School of Economics was reborn during a conference in the small New England town of South Royalton, Vermont. Why was this important? Because the economists of the Austrian School have developed the most persuasive understanding of why only economic freedom can give mankind both liberty and prosperity.

A truly free market economy is one that tends to have the “good deflation,” and we should look forward to it.

Ninety years ago, on November 15, 1923, the Great German Inflation came to an end when the monetary printing presses were finally shut down, and the economic havoc came to an end. Its lessons are worth remembering.

“Gold is money. Everything else is credit.” — John Pierpont Morgan

Did Janet Yellen,
(1) see any problem in the housing bubble,
(2) anticipate the bursting of the housing bubble; and,
(3) anticipate its implications for the U.S. economy?

The answers are (1) no, (2) no, and (3) no.

GOLD The World Gold Council on May 16 issued it summary report for the first quarter of 2013.  Central banks added 109.2 metric tons of gold to their reserves, the…

The other day I came across a good review of Edmund Contoski’s  latest book, The Impending Monetary Revolution, The Dollar and Gold, at Feathered Quill Book Reviews. An excerpt from that…

Auditing the Fed, replacing Fed monetary policy discretion with a mandatory price rule governing policy, even the gold standard, Nobel Laureate Friedreich Hayek pushed the envelope beyond all of these.…