George Selgin on the Audit of the Fed, and Why We Could Even Do Without the Fed

Selgin is fantastic in this interview with The Joy Cardin Show on Wisconsin Public Radio.

Selgin is clear that he doesn't want Congressional oversight, but that the Fed has engaged in activities beyond its monetary policy mandate so an audit is necessary at this moment in time.  Selgin lays out a step-by-step set of reforms that follow from making clear what the Fed is up to, to putting constitutional restraints on the Fed, and eventually abolishing the Federal Reserve System and replacing it with a working free banking system.

George's great skill is make very radical ideas seem reasonable --- and the reason he is able to do this is simple.  They are reasonable when you follow the logic of economics and study the history of money and finance at the level of detail that Selgin does.

Comments

[K Sralla]

Selgin does a great job in the interview. The part that I found amusing was the fact that George Selgin is publically defending Ron Paul's bill to audit the fed. Selgin even gives a great rebuttle to a caller's charge that anarchy in the banking system will lead to chaos. So much for the family feud between Austrians.

[Peter Boettke]

K Sralla,

Check out Kirzner's lecture linked to in the immediately previous post around the 1:01 mark.

Pete

[Unit]

What a gentleman.

[king mises]

He is royalty among economists!

[bill woolsey]

Two years ago, I would have thought that Paul's proposal to audit the Fed was nothing more than a sop to his conspiracy theorist followers. It was all about showing that the secret international banking conspiracy is making huge profits from currency issue by the Fed. Aside from not having to ever read again, "and the Fed has never been audited," the only value would be getting the fat out of the Fed operations. Last I checked, the budgets for operations were about $1.4 billion (with the profits going to the member bank "owners" of the Fed being $600 million.) You know, all of those free publications that the Fed banks provide are part of that budget. I am sure there is plent of fat.

But, like George, that was before. Now that the Fed has developed its new policy of targeting loans to troubled sectors of credit markets, no longer is Fed independence simply about the quantity of money and its purchasing power. Of course, I don't know that having an additional avenue for Congress to manipulate the allocation of credit is helpful. But it would be nice if Congressional review of this activity would convince the Board of Governors to give up on its new approach.

[Bill Stepp]

This was quite a good discussion of the problems with the Fed. In response to the first caller, Linda, who mentioned good derivatives and bad derivates, he might have pointed out that the Fed's easy monetary policy of a few years ago (he does mention its role in the housing bubble) made the deleterious effects of these instruments worse, particularly the poorly designed ones.