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Thread: Does the Federal Reserve Create Recessions?

  1. Default Does the Federal Reserve Create Recessions?

    “The Fed has been responsible for every recession in the past 100 years.” — Paul Krugman, Nobel Prize-winning economist

    I don’t agree with Paul Krugman on many things, but he’s right when he says that the Fed is culpable for causing the ups and downs of the business cycle in the United States. Milton Friedman argued the same thing. In this sense, both Krugman and Friedman — political opposites — are monetarists.

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    The fact is that the Federal Reserve, whether under Paul Volker (1979-1986), Alan Greenspan (1986-2006), Ben Bernanke (2006-2014), or Janet Yellen (2014-present), has engineered a boom-bust cycle that has caused stocks to enter a bull market and sometimes a severe bear market.

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    What is the Fed up to now? Based on the chart, the Fed still has adopted an easy-money policy. Not only are interest rates low, but the Fed seems to have backed up raising rates. Moreover, the supply of money is gushing, with M2 growing at a 9% clip. The Fed is still fighting a slowing economy (largely caused by the Obama administration’s anti-business attitude, higher taxes and more regulations).

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    I just arranged a big debate at FreedomFest you won’t want to miss: “Should the Fed be Abolished?” “Yes!” says John Tamny, editor of RealClearPolitics, and author of the brand new book, “Who Needs the Fed?” subtitled, “What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America’s Central Bank.”

    Warren Coats, a Chicago monetarist (who got his Ph. D. under Milton Friedman) and a former International Monetary Fund (IMF) official who helped create central banks in Bosnia and Iraq, responds, “Who Needs the Fed? We Do!”

    The biggest challenge for those who want to abolish the Fed is to find a legitimate alternative. Is it the gold standard, as George Gilder and Steve Forbes indicate? They will both be at FreedomFest to debate the issue.

    This is going to be a great debate, and I hope you can join us and hear all the action there, July 13-16, 2016, at Planet Hollywood, Las Vegas.

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