‘Who Needs the Fed?’ author John Tamny explains where Milton Friedman, Austrian economists, and supply-siders go wrong.
For the first time in decades, the Federal Reserve has been playing a non-negligible role in the presidential race. Candidates in both parties took turns criticizing the Fed for either not doing enough to fix the economy, or for going far past its scope and putting the economy at risk.
But moving beyond political stump speeches—and, for that matter, conventional thinking among economists—the question should still be asked: Does the Federal Reserve even matter? Here author John Tamny explains the thinking behind the title of his provocative new book, “Who Needs the Fed?” (Encounter Books, May 24).
Jared Meyer: I want to start with your conclusion. You write, “End the Fed? With great haste,” (emphasis in original), but then you go on to explain why ending the Fed will not “get us out of the woods.” Why did you build up Ron Paul’s “End the Fed” supporters, only to tear down their hopes that the Fed is the source of all our economic ills?
John Tamny: I had to build up Ron Paul’s supporters only to douse their hopes a bit simply because I think all the focus on the Fed misses much greater governmental threats to growth.
About the Fed, end it with great haste simply because it serves no useful purpose on its best day. Think about it. It was formed over 100 years ago as a “lender of last resort” for solvent banks, but the act of solvent banks approaching the Fed for loans is unheard of. It is because banks with good balance sheets don’t need the Fed. Only the insolvent approach the Fed for funds, and those institutions should be allowed to go under so that they can be acquired by better owners.
You can read the full interview at The Federalist.