The first debate between Dr. Murphy and a Fed economist can be found here: http://www.youtube.com/watch?v=P-gl0E9bRa4

Dwyer is going to offer the rationale behind the Fed’s current policies.

I will attempt to summarize this rationale:

Civilization can best be advanced by the provision of fiat currency through the means of the infinite expansion of government debt, at a rate to be determined by government appointees.

Every clause of this rationale is begging a question.

How is an entirely unbacked currency in any way beneficial to anyone except the issuer of the currency, or anyone else who can convince some other party to trade valuable goods or services for the valueless currency?

How can debt expand infinitely? Eventually, either the interest payments will consume all of the funds available to the debtors, or else the of the value of the currency must be diminished to the point where although the debtors can make their payments, the net worth of creditors and savers (in terms of purchasing power) will be wiped out.

How can anyone determine an optimal rate of expansion of the money supply and therefore of government debt? As demonstrated by the previous point, the interests of these two groups are directly opposed. Debtors, especially governments, have a strong interest in continual, rapid expansion. Creditors, mostly consisting of the industrious and thrifty non-government sector of society, have a strong interest in a low or zero rate of expansion. What methods of statistical analysis and mathematical calculation pretend to be able to balance the directly opposed interests of these two groups?

As for the appointment of people who claim to possess methods and formulas for determining this claimed optimal rate of the expansion of money supply and government debt, why would those in the government, who benefit from the expansion, wish to appoint someone who does not favor their own interests? In other words, how can the government itself be an arbiter of a dispute involving the interest of those in the government versus those outside of the government?

The broadest point of all concerns the existence and fundamental nature of government. How can the infinite provision of credit to the government be considered as a desirable goal for the greater good of society, when government is by definition an entity which paradoxically claims that violence is the most effective means for encouraging industry and promoting social cooperation and charity?

The argument would be over if the very first point could be determined, which concerns the nature of money and exchange. But somehow I think that the Fed side of the debate will not wish to become entangled in this fundamental point, and will instead try to focus on the minutiae of statistical data which allegedly reflect the rate of employment, the rate of price changes, and the so-called “velocity” of money – and the way that these statistics are supposed to change according to the policies of the Federal Reserve.

Good luck and good hunting!

I am still waiting for the Krugman/Murphy debate. It will be the most epic showdown in the 21rst Century and comparable to the Keynes/Hayek debates (at east for us economic nerds). I am sure Murphy will do well against this guy. History and logic are on his side.