Public failure, private success

On the Mises blog, Jeff Tucker writes about economist Elgin Groseclose and his research on the Fed: "He shows that the gap between the promise and the reality is shockingly massive, so much so that the Federal Reserve must be considered one of the greatest failures in the history of public policy."

Tucker and I feel the same way about the Fed, so I assume without too much investigation that I'll agree with Groseclose more or less, but I do want to quibble here. And not just here, but all over the political economic map. It's something I've wanted to say a hundred times before: government programs do not fail nearly as much as we think. They fail spectacularly in terms of their publicly-stated missions of aiding the common good in their own ways, but the people that conceive the programs are generally clever people, and I suspect they know what they're doing most of the time. Take any industry lobby, for instance, and you'll see it's probably behind a lot of harm to the American and world economies. If its mission were to help either or both of these we'd know they messed up. But their mission is to help themselves at our expense, and in that respect they're doing a grand job.

Likewise, I believe that the banking interests and their government friends that set up the Fed knew what they were doing. They might not have foreseen everything, but they knew the banking cartel would benefit. Mission accomplished.

I could be accused of cynicism for this position. Of course, I don't see it that way.

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This is a very good point

This is a very good point that needs to be emphasized. It's also often true of government programs that aren't primarily about making the supporters wealthier- public education and "public health" nanny statism are probably the best examples. Frankly, I think libertarians (and a lot of conservatives, for that matter, at least prior to 9/11) are frequently far too willing to assume that their political opponents are well-intentioned and acting in good faith.

Examples, please

Because I do not subscribe to the zero-sum-game model of the economy, I do not reach the conclusion that some people have suffered merely because other people have benefited.

I’d find this post more insightful if it contained even one example of some harm the Fed caused, relative to a world in which no central bank was operating. Perhaps we could compare the operations of the US economy with the economy of the Euro zone, an economy that lacks any effective central bank?


Example: The 1920 crash where the Fed did not use it's powers to "solve" the downturn, vs. the 1929 crash where it did. The solution was far worse than the problem.

There are many examples of central banks allowing the member banks to inflate (via reserve drawdowns) to disastrous levels, causing nasty booms followed by busts.

You just lived through a couple.