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The Daily Reckoning

Three words to fix our monetary system: End. The. Fed.

The Federal Reserve's easy money policies are leading to tumultuous markets. Something drastic should be done.

(Page 2 of 2)

As for the “fetish of full employment,” as Henry Hazlitt so eloquently explains in his classic, Economics in One Lesson:

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“The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it [financially] unnecessary for millions of women to take jobs.

“The real question,” continued Hazlitt, writing in 1946, “is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living?”

The Fed is the work of Woodrow…a creature of Congress. As George F. Will, writing in The Post, once put it, mission creep is part of the “metabolic urge” of government agencies. The Fed is no different. It is an Ouroboros running out of tail on which to feed. There’s nothing free market about this beast, Fellow Reckoner…and nothing free market about the economy that stands on its sunken shoulders.

Without space for competing currencies, the invisible hand is bound and cuffed, unable to feel around in the dark, to set reliable prices. Value is distorted, malinvestment promoted.

In the end, you get unpredictable stock market volatility and a dollar shaved to within 1/1,500th of its life. Exactly what you’d expect, in other words.

The solution? Here, a modest suggestion:


Instead, allow competing banks to issue competing currencies. Allow the fundamental underpinning of an economy – it’s medium of exchange – to discover its own “fair value.” Witness competition weed out banks that lend imprudently and that rip off customers, to the favor of those operating with prudence and fiscal integrity. Watch institutions that choose to issue baseless, paper money go bust without federal bailout funds and those that adhere – freely, without let or hindrance – to a gold standard garner the public trust their thrift and judiciousness earns them.

Wishful thinking, you say? Well, until such a time comes to pass, here’s another suggestion, courtesy of our Reckoner-in-Chief, Bill Bonner:

“Buy gold. Be happy.”

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