Monday, June 18, 2007

Give me that old time religion...

Apparently GOP candidate Ron Paul has introduced a bill to abolish the Federal Reserve system. The text of the bill has not made it online, so I'm fuzzy on exactly what Congressman Paul is suggesting we replace it with, if we replace it at all.
The real entertainment is, of course, the comments. I've been reeling from the Sy Hersh article on Taguba, and this piece made me nostalgic for good old fashioned economic nuttery. I was particularly amused by people who invoke the name of Uncle Milton Friedman in their effort to get rid of the Fed. It's clear they don't know what Friedman's argument was about the Great Depression in his book, Monetary History of the United States, 1867-1960.. In a nutshell,he and his co-author essentially argued the Federal Reserve could have made a difference in the early days of the Great Depression by increasing the money supply. If anything, their book supports the idea of central bank.

I was particularly fascinated by the gold standard hysteria. We haven't had a really nasty gold standard and specie brawl in this country since the election of 1896. The idea that the gold standard, would prevent inflation/deflation requires a concerted effort to ignore the economic history of the United States in the 19th century, where the country routinely oscillated through boom/bust cycles, despite the existence of an international gold standard that operated up to 1914.

It seems the problem to these people is the idea of currency without a net. Essentially, our monetary system is founded on the idea that the currency issuer isn't an international deadbeat. Which is why I've been screaming on the Mojowire for the last 6 years about the utter stupidity of the Administrations' lackeys spitting and hissing into every camera they can find about how U.S. bonds are I.O.U's, and the U.S. might default on them. Nothing breeds confidence in a rapidly globalizing world more than the worlds biggest creditor nation threatening to climb through a men's room window to avoid paying it's bar tab.

There really are issues to be concerned about regarding currency and debt in the current international system. Some of the commentators in the linked piece come close to touching on a few of them, namely the threat of U.S. creditors redominating into Euro's. That will be a day to use an umbrella when strolling down Wall Street.

Economic paranoia and ignorance is almost refreshing compared to people who advocate and justify brutal and sadistic torture. Thank you, Congressman Paul, for the distraction.

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