Friday, October 21, 2011

Good Ron Paul Article About Financial Crisis

In case you haven't seen it yet, Ron Paul has a good article about the financial crisis and the Fed in Wall Street Journal.

My one objection is that he thinks (or at least gives the impression in the article that he thinks) that the abolition of the Fed (and other central banks) would mean no more financial crisis. But as the existence of financial panics before the creation of the Fed in 1913 illustrates, that is not true. The really crisis generating institution is instead fractional reserve banking.


Blogger Ralph Musgrave said...

I put a chart showing economic fluctuations in the US since 1870 on my blog. See:

Looks like the Fed was not too good at ironing out fluctuations in its early years (1920s – 30s). That backs Milton Friedman’s claim that the Fed was so incompetent that it contributed to problems in the 1930s, rather than ameliorating them. On the other hand, fluctuations after WWII seem to be less severe than in the 1800s. Hopefully we are learning.

7:38 AM  
Blogger Marcel said...

So what you say is that there ought to be a national bank = monopolisation of the legal tender?

1:34 PM  
Blogger stefankarlsson said...

Marcel, what I'm saying is that as long as it is not accompanied with the end of fractional reserve banking, the end of central banking won't mean an end to financial panics. That doesn't mean that the end of central banking alone isn't desirable on other grounds.

10:53 PM  
Blogger Ralph Musgrave said...

Stefan, I’m also opposed to fractional reserve. But I am not impressed by 90% of the arguments for full reserve or 90% of the arguments for fractional reserve. Do you know of any decent quality articles or papers which really demolish fractional reserve?

5:00 AM  

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