End The Fed?

I’m not an economist.

I don’t have enough knowledge to understand all of the issues involved in radically changing monetary policy away from fiat currency managed by the Federal Reserve System, towards a gold standard (or some bundle of commodities), or competing private currencies.

My gut inclination is that the power over money is likely to be abused, or mismanaged, by any central authority, and it’s best to just establish a good institutional framework that allows for the evolution of private systems of exchange media, or, if that’s not feasible, to constrain monetary policy by simple reasonable rules that may be something like a gold standard. But, I’m temperamentally conservative enough to be a little cautious of making a radical and potentially disruptive change that could have a lot of negative consequences on people who were led to believe in the continuation of the current system. So, I’ve been ok with mostly agreeing that the focus of some right-libertarians like Ron Paul who want to End the Fed, may be a bit foolish and extreme. Megan McArdle seems pretty sure that it’s a bad idea.

But, after listening to this recent Econtalk podcast, in which John Taylor argues that the recent financial crisis is largely the result of bad Fed policy, and seeing some recent responses (by Robert Higgs and Lawrence H. White) to a petition by some economists “To reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of U.S. economic stability”, and thinking back to Lawrence H. White’s fairly recent defense of the gold standard, I’m starting to think that a move in this direction may not be as crazy or dangerous as I’d thought.

It doesn’t really matter practically, since I don’t think that such a thing will be feasible for quite a while, but I’m getting more open to the idea that a move away from the current monetary system is a good idea.


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