The Slumlord Fed
The Federal Reserve was sold as the end of financial panics. Eighteen recessions later, the case for closing the building.
The argument in four steps
- Its founders promised that panics of the kind seen in 1873, 1893 and 1907 had become impossible.
- Eighteen recessions have followed, including the two worst downturns in American history.
- Its models assume constants of the sort physics has and human action does not.
- An institution that creates its own money cannot go bankrupt, and so has no reason to stop.
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Terms in this piece
- Austrian business cycle theory
- New money pushes interest rates below what savers actually supply, drawing investment into projects that cannot be finished. The bust is the correction, not the disease.
- Say’s Law
- Production comes first: what you make is what you buy with. Demand is not a separate engine that has to be fed from outside.
- Sticky wages
- The claim that pay will not fall in a downturn, used to argue that money must be printed. Where wages did not fall, government had usually propped them up.
“The Fed is a total failure, from start to finish.”
From the article
Keep reading
Four ways to go further on the Fed
All four are free to read in full. Pick the one that matches the time you have.
What is Austrian economics?
A plain introduction to the school this argument comes from. No economics background needed.
About 2 hoursWhat Has Government Done to Our Money?
Rothbard on where money comes from and what changes when governments take charge of it.
An eveningThe Case Against the Fed
How the Federal Reserve came to exist, who wanted it, and whose interests its founding served.
About a weekAmerica’s Great Depression
The 1929 crash read through the theory: the boom was the mistake, and the bust was the bill.
Chosen from the tags this piece carries: The Fed, Inflation, U.S. Economy, U.S. History.
Monetary Savings Versus Real Savings
What the savings figure measures, and what it leaves out.
Mises Wire · SmithParadise Lost, Government Gained
The same author on how Americans won the argument and built a state anyway.
Mises Wire · AnthonyAustrian Economics Made Obvious
If the method behind the argument is the part you want explained, start here.
George Ford Smith
A former mainframe and personal computer programmer and technology instructor, and the author of eight books. Everything he has written for the Institute.
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