Wednesday, August 5, 2009

Milton Friedman on why the Fed is not private

James Pethokoukis asks if any economists support Ron Paul's Audit-the-Fed bill, and gets the usual vitriolic comments from Ron Paul supporters. Some of the commentors argue that Milton Friedman (conveniently not alive) would've supported it, and a recurrent theme of the Pauliacs is that the Fed is a "private" institution (which happens not to be true). It is true that Friedman was a critic of the Fed, and would've preferred it had never come into existence, but he had very little patience for anti-Fed crackpots and conspiracy theorists. Below is what Friedman wrote in a long footnote on p. 206 of his book Money Mischief: Episodes in Monetary History (which book I reviewed in Commentary years ago), on the supposed private nature of the Fed:

There is much confusion about whether the Federal Reserve System is a branch of the government or a private enterprise. That confusion has sparked a host of "crank" conspiracy literature.

The Board of Governors of the Federal Reserve System is composed of seven members, all appointed by the president with the aid and advice of the Senate. It is clearly a branch of the government.

[Friedman goes on to explain how the Fed's regional banks are nominally privately owned by banks in their respective districts, but that the Board of Governors has the final word on policy, not the regional Fed banks, which moreover have to turn their net profits over to the U.S. Treasury.]

In short, the system is in practice a branch of the government, despite the smoke screen of nominally private ownership of the district banks.

1 comment:

Anonymous said...

I think you may want to read some of Murray Rothbard's works before you start throwing childish names at people that rightfully disagree with you, for more informed reasons. Better yet, go with the 21st century intellectual indolence and watch, instead of reading:

One more thing, if you knew anything about Milton "shock doctrine" Friedman and his corporatist-fascist FAKE "freemarket" lemming kool-aiders from U of Chicago, you would not be promoting such nonsense.

Just 'cause you have a laptop and a blog does NOT make your a priori assumptions about something you do not yet know, to be true.

REALITY, it's a funny thing, whether you believe it or not, it is irrelevant.

Enough people know what the hell is going on. Stay in denial, and find out just how pertinent your "opinion" remains just that.

Sad. Truly sad. With all this info around the world today, with the fastest, most easiest access to info available, yet so many still only seek out info to only confirm their own misinformed NON-reality.

Hey, if you feel better. Who can blame ya. As long as you understand that why you're doing what you're doing, my man, world still stays flat, right?

Okay, so if you're to accept one of the 26 dimensions of the string theory being tossed around, perhaps one of those can be a flat universe, with 3rd dimension equaling time, instead of the 4th. Who knows, you may be correct in that universe. But, that's a hypothetical based on an unproven hypothetical theory. And, that's how much stock I put in your uninformed, misinformed denial of the FACT that the FED is private entity.

I am sure if you keep blogging that WMD's were found in the sands of Iraq and that Hussein were responsible for 9/11, it'd come true, too. Keep clicking those RubySlippers, Dorothy.