A Century of Failure: Why It’s Time to Consider Replacing the Fed | George Selgin

Selgin addresses a number of questions about the Fed by looking at relevant historical statistics, and shows that it failed on each count:

* Did it reduce unemployment?
* Did it stabilize prices and value of money?
* Did it kept prices more predictable?
* Did it avoid dangerous deflations? Two kinds of deflation: demand shrinkage vs. increased supply. The Fed has given us more bad deflations (demand reduction) or inflation, as opposed to good deflations before the Fed.
* Was GNP volatility reduced? The problem is with how statistics were collected and computed before 1920.
* Has the frequency and length of recessions has improved under the Fed? Those statistics remained about the same.

Overall, he adopts the mainstream economists’ point of view to evaluate the success of the Fed and illustrate its failure.
Also, he points out a number of other factors which cause his analysis to underestimate how bad the Fed performed. For instance, he takes care to discount the interwar period as “practice”, as some mainstream economists do.


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