The Greenspan legacy

[G2099]

Before Greenspan's actions are considered, the very notion of the Fed itself ought to enter the limelight.

The Federal Reserve is not a capitalistic entity compatible with free markets. Instead it functions just like the miserably failed old-school command-and-control communism model.

The core philosophy of the Fed and its Federal Open Market Committee that controls short-term interest rates is that mere mortals meeting in secret like a conspiracy cabal are better suited at setting the price of money than the free markets.

http://www.atimes.com/atimes/Global_Economy/HA31Dj01.html

[scot]

1. An oddly libertarian argument,

but wrong in the sense that the free market will hold sway in the end. In this sense, the Fed plays the role of bookmaker: they establish the initial odds, but the market will ultimately move them to equilibrium.

[Selatius]

2. If this keeps up, the cheapest loaf of bread will eventually cost $3.00

The question is will wages keep up with inflation? In the long-term, it seems likely, but in the short or intermediate term, the answer isn't clear, and it might actually be a negative answer. Every year you don't get a raise is a year you get a pay cut.

All people need at the least is a stable money supply that isn't easily subject to massive fluctuations according to the whims of a small number of people. That's all. Is the guy arguing for a more democratic method of setting monetary policy? It seems like he is, but in what shape that takes is a whole new discussion.

[Warpy]

3. I'm in Florida right now, and most bread IS $3.00

Well, the range is $2.89 to $3.19 for commercially baked bread. I remember 18 cent commercial bread when was a kid so that will tell you how hard we've been hit by inflation without seeing a commensurate increase in wages.

Ravi Batra has a book out on Greenspan's legacy. I have been poor for the last 3 years so I haven't read it yet, but his other books have been top notch. I know he covers the manipulation of the markets, wages, and "free" trade, and discusses Greenspan's role in sabotaging Social Security.

It's on my list for when I get home.