Tag Archives: the fed


Are you among those who have considered the morass of the United States’ and world monetary system with concern and dismay?

Have you wondered if there is a workable alternative?

The purpose of our book, “Capital as Money,” is to demonstrate, by means of a simple and enjoyable story, that we have the technology and tools to evolve to a truly endogenous private system of exchange and valuation—of money.  Under such a voluntary arrangement, the volume of “money” and the speed at which it is exchanged is simply determined by private need and desire, not by some policy imposed by a central bank or the accidental and destabilizing results of lending within a fractional-reserve banking system.

Imagine a world in which the unit of exchange (productive capital) gradually increases in average purchasing power—a world in which sustained inflation is a foreign concept.

We believe that markets now have the tools and the ability to evolve to such a world, a world of productive capital as money.  What is needed from us is the will and imagination to make the change.

Is the value of aggregate productive capital in an economy naturally volatile?  Perhaps. There may be some volatility associated with what a unit of capital (for example, a tractor) can produce.   More likely the uncertainty in the value of future income streams to capital is caused by fluctuations in central bank monetary policy, causing variability in the stock of fiat money, and inevitably inflation.  Capital appears volatile only because it is viewed through the lens of fiat money.

To those who would argue that a central bank is needed to wisely intervene through monetary policy to stabilize and micro-manage a private economy, we would offer the following historical food for thought.

Since 1999, the United States Federal Reserve, under two chairmen, dramatically expanded the money supply and lowered the target short-term interest rates to nearly zero following the 2001 terrorist attacks.  Then, after spawning a crazed explosion of loans and mortgages up through 2005, the Fed stepped on the brakes, slowing money growth and raising the target Federal Funds Rate to over 6 percent.  This extreme “roller-coaster” policy caused the predictable collapse of a vulnerable credit market, housing market, and a decline in the U.S.economy that has rivaled the Great Depression in duration.  The Fed then responded by lowering target short-term rates to nearly zero and the record but fruitless expansions of the money supply represented by quantitative easings I, II, and III.

A skeptical observer of all this is justified in asking, “Might the economy have been more stable and the two recessions either avoided or less catastrophic over the period 1999-2012 if the Fed had simply held the Federal Funds Rate target stable at say some reasonable intermediate level such as 3 percent?  Stabilization policy indeed!

If the last decade and a half are representative of stabilization policy by the Fed, please spare us from any more.


You need to read “Capital as Money.”

Share Button