[A-List] The Case Against Central Banking

[hliu at mindspring.com]

This series of articles on central banking is the result of ideas tested
and refined (and also learned) on lists in which I have paticipated in
the past few years.  I am in debted to many on these lists for both
critical and suportive comments and suggestions on many of my posts and
for stimulative posts from others that set me thinking a certain
directions.  In that sense, these articles are the result of a truly
collective effort, although the errors and mistakes in them are my own.

Henry C.K. Liu

Please note:

The Fed, notwithstanding its intellectual pretense, has always been a
political institution. The politics of economics repeatedly resurrects
from the intellectual wasteland, the theoretical Siberia as it were, new
gurus to support its latest ideology. Nobel winners are proponents of
theories that explain "scientifically" last year's political expediency.
The list includes Friedrich von Hayek (free market), Friedman (monetary
theory), Robert Mundell (global capital), Schumpeter (creative
destruction) etc. Wicksell makes it respectable for Greenspan to
abdicated his responsibility as Fed Chairman, by pretending to follow
the market, to treat interest rates as prices of money set by market
forces, and not as a tool to promote employment or growth, and if
necessary only as a tool to bail out banks in distress.

The embarrassing question of why then the United States needs a Federal
Reserve is never asked. The fact is that the monetarists at the Fed are
fervently intervening in the market - the only difference between
monetarists and Keynesians is that monetarists intervene to safeguard
the value of capital while Keynesians intervene to protect labor from
unemployment and low wages. As post-Keynesians economist Paul Davidson
said, everyone has an income policy; they just don't like the other
fellow's income policy but claim their own as "free" market determined.


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