Case Against the Fed

John Tamny this week makes a compelling case at RealClearMarkets that little can be said to support keeping the Federal Reserve around. He concludes:

We’ve been conditioned to believe that the health of the banking system and of the economy more generally are responsibilities of a powerful Federal Reserve. But if its core mission is analyzed even lightly, it becomes apparent that much of what the Fed does is ineffective, destabilizing, superfluous, or all three.

Implicit in the desire for a Federal Reserve is that individuals in government possess magical powers that enable them to do for us what we can’t do on our own. More realistically, the US economy grew quite nicely without a central bank. Given continuous advances in financial alchemy, it’s exciting to imagine what private actors would do for banking if the Fed ceased to exist.

The unfortunately reality is that we might have reached a point in finance that getting rid of the Fed is a political fairytale. And even if it were to be possible, the transition would certainly have to take some time. But in an ideal world, Tamny’s case strikes a sound chord for which there is little argument against, unless you believe individuals can possibly be all knowing sages in the marketplace.

Read the whole argument here.