Money and Banking

If the newly elected budget "hawks" really wanted to impress us, they could refuse to raise the debt ceiling. Then they and their colleagues would have no choice but to start slashing.

Thanks to the doublespeak of monetary-policy experts, the launch of monetary policy leading to high inflation may not be discernible by the public at large.

Fiat money — or, to be more precise, its production — is already a violation of the free-market principle; and fractional-reserve banking amounts to leveraging the economic consequences of fiat money. Austrians favor a money that is freely chosen and operates by market principles.

Gold in the money survived all the way to Nixon, and it was he who finally drove the stake in once and for all. That was supposed to be the end of it, and the beginning of the glorious new age of paper prosperity.

It is amazing that this system, jerrybuilt at Bretton Woods in 1944, is not only still tolerated but regarded as practically sacrosanct. Its paternity was not auspicious. Its two fathers were Harry Dexter White of the United States and Lord Keynes of England.

Recorded at the Mises Circle at Furman University on November 13th, 2010.

Can the government tell the Fed what to do? If Congress and the president are agreed about what to do, yes. If there is disagreement over monetary policy — and there usually is — then the Fed does pretty much what it wants.

The worst of Bernanke's statements came in 2006, near the zenith of the housing bubble. This was the era of the subprime mortgage, the interest-only mortgage, the no-documentation loan, and the heyday of mortgage-backed securities.

If we wish to culminate the fall of the Berlin wall and get rid of the real socialism that still remains in the monetary and credit sector, a priority would be the elimination of central banks, which would be rendered unnecessary as lenders of last resort if a 100 percent reserve reform were introduced.