Three Down, Four to Go

Today, vice chairman of the Fed, Donald Kohn announced that he will be retiring effective June 23rd. This marks three vacancies on the board. If only they would all retire, resign, or merely keel over. Let's just hope these positions could be filled with people like Lew Rockwell and Robert Murphy. Then we could really End the Fed!

Bernanke gives Paul the "Idiot Treatment" (Watergate Payoffs)

From History News Network:

After Ron Paul raised questions about possible past Federal Reserve misdeeds including allegations of involvement in Watergate payoffs, Ben Bernanke answered smugly: "These specific allegations you've made, I think are absolutely bizarre."

The crowd reflexively laughed at Dr. No's perceived looniness and pundits have already depicted his concerns as "wild" and "odd."

Well, it seems that Paul may have been onto something...or at the very least raised legitimate questions that deserve investigation. A few minutes on Google news produced this 1982 story from theMilwaukee Sentinel by Richard Bradee of the paper's Washington Bureau:

"Police who searched the room the Watergate burglars used found $4,200 in $100 dollar bills, all numbered in sequence. Proxmire asked the Federal Reserve Board where the money came from. As he explained in a letter to the late Rep. Wright Patman (D-Tex.), chairman of the House Banking Committee: "I got the biggest run-around in years. They ducked, misled, lied, and gave me the idiot treatment."

The Wrong Way to Argue "End the Fed"

Murray N. Rothbard is probably my favorite philosopher and economist -- I have adopted wholesale his natural rights/deontological libertarianism, and his application of this ideology to war and punishment theory. I have fallen in love with the writing of his favorite author, H.L. Mencken. Even on those issues I disagree with Rothbard on -- such as abortion, immigration, and children's rights -- I have to admit that he makes extremely strong cases.

But in my opinion, MNR's view on Fractional Reserve Banking is uncharacterically poorly thought out.  While I certainly join him in calling for the abolition of that monster we call the Federal Reserve, Rothbard believed that Fractional Reserve Banking was inherently illicit and would be outlawed in the free society. He argued that since a bank in such a system does not actually have all the money it is storing and lending out, it is engaging in "fraud."

It certainly is criminal for the state to  outlaw any competition with the money its Federal Reserve controls the supply of.  Because we must accept the Fed and Fractional Reserve Banking, this enables  them to do all sorts of evil things, to include the ability to create endless money to fund wars, pay back debts, and print their own budget.  Surely, a "gold standard" or some sort of Full Reserve Banking, would be far preferable to Fractional Reserve Banking. This would at least limit the amount of money they could produce.

Sound economics or insanity?

Albert Einstein once defined insanity as "doing the same thing over and over again and expecting a different result."

An article in USA Today entitled "Fed keeps interest rates near zero; economy continues to 'strengthen'" seems to fit the definition.

I would go out of my way to strongly emphasize the quotes around the word strengthen. Artificially low interest rates are what brought our economy to the sad state it is in and are what continue to drive the economy closer to a depression. Though the article pretty much spouts typical Keynesian rhetoric and acts as though a "jobless recovery" is a completely rational explanation for the current state of un-employment in the country, it does contain one small grain of truth:

Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers. They're especially hard on people living on fixed incomes who are earning measly returns on savings accounts and certificates of deposit.

The article does not explicitly explain why low interest rates hurt savers and low income earners but those who are familiar with Austrian economics will know that it is the inflation that is born from these low interest rates that causes the destruction.