Is the Federal Reserve a failure of the free market (i.e. something that is better reserved for a government to do)? I’ve had people ask me this a few times. I usually respond that the money supply would not increase in a free market due to printing money, which satisfies some people, but not me necessarily. I know that Milton Friedman advocated steadily increasing the money supply, which we’d need fiat money for. But wasn’t the Great Depression partially caused by there being too little money in circulation?
Help me out on this because I’m pretty confused on everything I just mentioned.
Brian,
You’ve got a typo in the subject line.
The existence of the Federal Reserve is not a failure of the free market. No more than a murder victim failed to stop a bullet.
Money production is not better reserved for a government to do. No more than the production of shoes is better reserved for a government to do.
Murray Rothbard makes the case that the Great Depression was not caused by too little money in circulation. That is an excuse used to justify the Fed’s interventions.
Are you open to some reading suggestions? What have you read so far?
Thank you for that! I fixed it.
I wasn’t sure if that was an excuse to justify its interventions like you said, or if it simply showed that the Federal Reserve caused it by intervening.
I’m definitely open to reading suggestions. Truthfully I haven’t read too much on the economy besides random short papers and stuff I come across because I’m pretty new to learning about Austrian economics. So anything would be great, but hopefully it won’t be too confusing for me, haha. And I’ve only read End the Fed as far as the Federal Reserve goes, so not much. If you could help that would be great.
The Fed and any other NON-MARKET institution like it can not be a market failure as there is no market mechanism that would create such an institution. Actually the market would reject an institution whose sole purpose is to devalue money by creating it and handing it to its friends. Actors in the market would reject such a system and use some other form of money.
This is equivalent to saying that patents and copyrights are market failures. These monopolies were invented by government and not by the market.
Excellent!
Here is an essay by Leonard Read, Read it carefully. It is not about the Fed, but it will get your mind nimble enough to begin to understand the complexity of market process.
The free market (better referred to as the “unhampered” market), organizes itself to address all the complexity described here. Behold, the complexity, the reality, of building a simple, wooden, pencil.
I, Pencil - Leonard Read, 1958 - This should be entry level reading for every economics class, but instead it is ignored.
Then, read this. It is easy to absorb in a fairly short time. It is your primer on the Fed.
What Has Government Done to Our Money - Murray Rothbard
Read both of the above slowly, carefully. Try to really absorb what is being said. Take your time. Start a new thread with specific questions.
Do you know any good links to papers/media regarding the Austrian take on patents and copyrights? I truthfully don’t even have an opinion about that subject right now because I know too little.
Thanks, Chloe! I’ll make sure to do that! I appreciate the help!