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I think that you are painting a false dilemma by just talking about Keynesians vs. Austrians. What about Milton Friedman's Chicago School and Monetarism? I think he got both issues right: he believed that (1) a central bank should print fiat currency and expand/contract the money supply as needed to keep prices stable, and that (2) we should choose the free market over central planning as much as possible. A fellow libertarian once asked me how I could call myself a libertarian while supporting the existence of the Federal Reserve and fiat currency. I reminded him that not all libertarians are deflation-loving, central-bank-hating "gold bugs." Milton Friedman and Alan Greenspan best represent my brand of libertarianism.
Two thoughts... 1. Congress might be responding to the growing grassroots movement of anti-Fed, anti-fiat currency, deflation-loving, "gold bugs." This seems to have become much more popular since now regular folks have lost some trust in the financial system, and the conspiracy theories (which sound plausible to the uninformed) are readily available to anyone who decides to Google our banking/monetary system. Not many people are out there setting the record straight. 2. You may be right that Congress wants more control, but that is too frightening for me to think about. Whenever I'm talking to people who want to abolish the Fed and "take back the power to issue our own currency," I ask them if they really want to give Nancy Pelosi (or some other politician with an agenda and no financial background) the keys to the "printing press?" Personally, I like the idea of letting the financial experts manage the currency while under the watchful eyes of elected officials... it's a healthy and prudent balance of power.
Toggle Commented Jun 30, 2009 on The Fed vs the Politicians at The Skeptical Optimist
... And meanwhile there is the speculation about lowering the credit rating of the United States. Since I'm too young to remember, I'll ask: Was there talk of such non-sense in the late 80's and early 90's too?