Free Prices Now!: Fixing the Economy by Abolishing the Fed
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From the Introduction:
“Why is the human race so poor? Why do billions still lack enough even to eat? . . .
“Safety is certainly an important factor. No one will bring wealth out of hiding, much less invest it, if it is likely to be stolen. But honesty is equally important. . . .
“The most reliable barometer of economic honesty is to be found in prices. Honest prices, neither controlled nor manipulated, provide both investors and consumers with reliable economic signals. They are the foundation for a successful economy.
“A corrupt economic system does not want honest prices, honest information, or honest results. The truth may be unprofitable for powerful government leaders or private interests allied with them, or economic “experts” whose careers have been devoted to price controls and manipulations.
“Can it really be this simple, that job growth and economic prosperity depend on allowing economic prices to tell the truth, free from the self-dealing, manipulations, and self-interested theories of powerful special interests?”
Hunter Lewis writes in a crystal clear style. He cuts through the confusion about our economy and why it is doing so poorly. He notes that the Soviet Union fell because it would not allow prices to tell the truth about the economy. Why are we repeating the same mistake? Why won’t the US Federal Reserve allow truthful prices? Why do we tolerate manipulations of the price system? Lewis not only tells us what is wrong with our economy. He tells us what to do about it.
changes is the amount of new money made available to Wall Street by central banks. When the spigot is open, bubbles form. The new money is not of course given away. It is lent. And once the debt exceeds the capacity to repay, the bubble bursts and millions of people lose their jobs, as they did in the Depression of 1920, the Great Depression, the Crash of 2008, and in other recessions such as the one that followed the Dot Com bubble in 2000. About the Crash of 2008, President George W. Bush said
Wilhelm Röpke has noted that the more stabilization [by the Fed] the less stability.75 Austrian economist Friedrich Hayek makes the same point: The more we try to provide full security by interfering with the market system, the greater the insecurity becomes.76 As the Fed lowers interest rates by pouring new money into the economy, seeking thereby to prevent a general price decline, economic bubbles begin to inflate. These bubbles are, in turn, followed by bust. Nothing could be more ironic:
Reserve and Prices 11: Prices, Bubbles, and Busts 12: Price Fixing Follies 1 13: Price Fixing Follies 2 14: Why Falling Prices Are What We Should Want 15: How Dr. Fed Makes the Patient Sicker 1 16: How Dr. Fed Makes the Patient Sicker 2 17: “First Do No Harm” 18: Facing Up to Past Mistakes 19: Banking and Finance: The Great Fiction 20: Baby Steps in the Right Direction 21: Real Banking Reform 22: A New Monetary System 23: Returning to America’s Monetary Roots 24: Who Should Run the
provide. By August 2010, Bill Gross, chief executive of the largest bond manager in the US, Pacific Investment Management, was calling for complete nationalization of mortgage finance.120 But the Fed was busy with its more subtle solutions, whose implications were understood by few. It held short-term interest rates below the rate of inflation, so the banks could borrow at virtually no cost. It used newly created money to buy longer US or US agency bonds, which made the bonds owned by the banks
noted, it could be funded outside the congressional budgeting process and therefore without increasing the government deficit. Newly hired staffers lost no time in getting down to the question of how to verify a borrower’s ability to repay a mortgage, as reported by the American Banker.125 Apparently this responsibility had now been assumed by the government, since “too big to fail” banks could no longer be relied on to do their own banking. By the end of 2012, it was discovered that some