Who Needs the Fed?. John Tamny

      SIXTEEN Baltimore and the Money Supply Myth

      SEVENTEEN Quantitative Easing Didn’t Stimulate the Economy, Nor Did It Create a Stock-Market Boom

      EIGHTEEN The Fed Has a Theory, and It Is 100 Percent Bogus

      NINETEEN Do We Really Need the Fed?

      TWENTY End the Fed? For Sure, But Don’t Expect Nirvana

      TWENTY-ONE Conclusion: The Robot Will Be the Biggest Job Creator in World History

      Notes

      Index

       FOREWORD

      Rob Arnott

      AS YOU READ this volume, prepare to be surprised. John Tamny makes many controversial and provocative claims that run contrary to the prevailing views of the academic economics community and of the policy elite. Indeed, many of his claims will provoke anger among the guardians of the status quo. Readers should consciously set aside their commitment to mainstream economic thinking and read the book with an open mind. You may not come away agreeing with everything Tamny says, but you will—most assuredly—leave aware of a very new perspective on some very old topics. Your gray matter will be stimulated!

      The field of economics was originally called “political economy,” because policy choices have a profound impact on macroeconomic growth. With this latest volume, Tamny encourages us to take a fresh look at money and credit. He writes, as always, with clarity and insight, and skewers conventional economic thinking with great gusto. In so doing, he shows us that economics is no arcane field best left to the experts. The most important aspects of “political economy” can be understood by anyone with a healthy dose of curiosity and common sense. In their clarity and depth of insight, Tamny’s writings remind me of Jude Wanniski’s The Way the World Works. This type of critical thinking forces us to reexamine the prevalent economic theory in both academia and politics.

      This is no heavy-handed tome on the evils of central banks. There are no polemics here. Through a series of insightful—yet controversial—observations of the modern U.S. economy, Tamny leaves us with some powerful and important observations about the workings of our modern economy, particularly as they relate to credit. In this slender volume, Tamny reexamines the role of today’s Federal Reserve, the supposed price setter of credit, in shepherding (or not) our country’s economy. He expertly challenges the notion that the Fed can and does stimulate the economy, not with formulas and finance theory but with compelling logic. He explores whether the Fed is truly necessary, as conventional wisdom suggests it is. The reader is likewise challenged to view money and credit from an entirely new perspective.

      When we think about credit, it is natural to think first of our own credit. When we want to buy a house or a car, or start a business, a lender will want to see evidence that we have (a) the future resources to repay the loan and (b) a history of repaying past credit on time. In Who Needs the Fed?, Tamny points out that credit is not just dollars and cents; it is access to real resources. This approach hearkens back to that of John Stuart Mill and the notion that money is a veil: It has no meaning except as a means of exchanging goods and services, both across the economy and across time. With money, I can exchange my investment research ideas for groceries or for an auto mechanic’s skill in fixing my car, either now or in the distant future. Credit gives us access to goods and services today, paid out of future income (in other words, paid from our own commitment to deliver future goods and services to others).

      Should the federal government have a role in setting the price of credit? Investors and the business media all