Bill Fleckenstein (MSN Money) says that the next Fed chairman should “Be well-versed in the so-called Austrian School of Economics.... a school of economic thought championed by, among others, Nobel laureate Friedrich von Hayek. The Austrians deny that a central bank, such as the Fed, can work economic miracles by juggling interest rates. In effect, the Austrians hold, interest rates are the traffic signals of a market economy. Turn them all green, and what you get are lots of pileups.”
Of course Greenspan knew something about the Austrian School, sort of, and it didn’t do the trick. His idea of James Grant is a fine one too, though one hates to see fine journalists wasting their talents by becoming central bankers—in the same sense that a good businessperson should never become a politician. Better to turn these jobs over to dregs to minimize social loss. The best approach—and I’m guessing that Fleckenstein would be willing to give it a go—is to get rid of the Fed and institute sound money.
