One evening on Comedy Central’s Daily Show, Jon Stewart invited Federal Reserve Chairman Alan Greenspan to appear as a guest. The humorist asked “Why do we have someone adjusting the rates if we are a free-market society?”
It’s a good question that was addressed as a recent meeting of the Association for Private Enterprise Education (APEE) on the 100th Anniversary of the Federal Reserve. According to Jerry L. Jordan with the Pacific Academy for Advance Studies, the group assembled in Brunswick, Georgia. The Federal Reserve Act was passed, despite prior National Banks which were terminated by Presidents James Madison in 1811 and Andrew Jackson in the 1830s.
Politicians like GOP Texas Gov. Rick Perry have attacked the Federal Reserve directly. But many of the economists present offered a different strategy: ignore the Fed.
“When the Federal Reserve was created 100 years ago, it was seen as something that could conveniently print lots of money,” said Lawrence H. White, a George Mason University professor who won the Adam Smith Award at the conference. “But a fiat monetary system is not more efficient than the gold standard.”
To discuss the Federal Reserve, I discussed the issue with W. Lee Hoskins, the former President & CEO of the Federal Reserve Bank of Cleveland, a conference attendee. Hoskins was best known for open and frank discussions during his time at this powerful institution. He even called for the U.S. to withdraw from the World Bank and IMF.
But he did not rush to defend the institution. He was excited about the potential for Bitcoins.
But what about the recent troubles with Mt. Gox? Hoskins claimed that the Federal government was as much to blame for the Bitcoin instability over licenses and even demands for monitoring their customers more.
What about Paypal? Hoskins claimed that while it was a great program, it generally paid out in U.S. currency. “It should be allowed to pay out more in all currencies.”
Why isn’t there more support for changing the Fed, ignoring it, or ending it? Dr. White noted that one reason is that the Federal Reserve System has engaged in a form of regulator capture. The Fed backs research by its economists, which (not surprisingly) endorses the policies of the institution, created a sort of bias for the status quo. And maybe that’s why the Federal Reserve as persisted, despite years of complaints about its policies and heavy handed tactics.