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Source link: http://archive.mises.org/15727/charles-plosser-our-man-on-the-fed/

Charles Plosser, Our Man on the Fed?

February 17, 2011 by

He has been saying things that sound surprisingly Austrian in regards to the limits of monetary policy. FULL ARTICLE by Robert P. Murphy


Eric Parks February 17, 2011 at 9:38 am

Sort of like those attractive-sounding dissenting opinions from SCOTUS, right? Somehow, they never get to be the majority opinion. We just have to keep hoping (wink wink).

Dave Albin February 17, 2011 at 12:06 pm

I’ve often wondered why more economists don’t adopt more Austrian ideas, which are easily understandable (especially with well-written articles like this one). Is it arrogance, the idea that the fancy models must be right? I guess if you have not spent much time outside of academics or government, this is what you get.

Ohhh Henry February 18, 2011 at 12:04 am

Nearly all economists are either employed by the government or subsidized by the government. The government has no interest in a system of thought which disproves their contention that violent coercion is a necessary precondition for peace and commerce to exist.

I believe that the reason there are relatively few professional Austrian economists outside of the government and government-influenced sector is that the lessons of Austrian economics, while profound, are ultimately simple and easy to understand by nearly anyone. One doesn’t need to consult an economist with vast knowledge of the history of financial panics, or of the intricacies of fractional reserves banking, in order to save and invest wisely. Where these expert Austrian economists come in handy is to help refute the bad science practiced by the vast majority of non-Austrian economists, who are no better than sophisticated intellectual thugs. But there will never be a need to have a lot of these economists around – because the government sector doesn’t want them and private individuals, once they have absorbed the basic axioms of human action, don’t need them.

Thinker February 18, 2011 at 1:03 am

I think it’s more that most economists just don’t know much of anything the Austrian School. I’ve known quite a few economists who’d heard of the school but knew nothing of the details until I told them. In terms of method, I imagine many economists in their ignorance say, “Well, our models have lots of problems, but they’re the best thing we’ve got.”

noah February 17, 2011 at 12:47 pm

Maybe more economists don’t adopt Austrian ideas because those ideas would contradict their political leanings, if followed to logical conclusions. Party loyalty first.

Daily Reckoning just used this 1978 quote by Fed Governor Henry C. Wallich: “Inflation is a means by which the strong can more effectively exploit the weak… [it] introduces an element of deceit into our economic dealings… the increasing uncertainty in providing privately for the future pushes people who are seeking security toward the government.”

Like Krugman in his job as commentator, isn’t the Chairman of the Fed really much more interested in political dealings than in economic dealings? What one truly believes about economics would seem to have little relevance in pursuing the agenda of a top PR job that is concerned more with spin than anything else. Inflation? What inflation?

Jim Dew February 17, 2011 at 6:03 pm

Thank you. The “backhoes to ovens” example brings startling clarity to capital allocation theory. A good parable is worth a million theses. We all need to work harder to find ways of explaining Austrian analysis to average people (and voters). This example is a big help.

Bruce Koerber February 17, 2011 at 9:40 pm

Milder Counterfeiting Is Still Criminal!

Not all counterfeiters want to be wholeheartedly in alliance with the mobsters. It may be a slightly less corrupt personal ethics or it may be an intellectual persuasion (a particular ego-driven interpretation) that has caused his deviation but, regardless, the regression theorem of interventionism can be used to pin the terrible economic distortions and costs on each of these criminals.

Brett in Manhattan February 18, 2011 at 11:35 am

The Fed is an instrument of the financial establishment. If you think this current round of
QE has anything to do with liquidity, you’re not reading between the lines.

The banks have huge amounts of reserves. So, what’s the point of pumping more money into them? Answer, the Fed wants to get as much bad paper off the banks books and put it on the Fed’s, so that when they finally start raising rates, it’s the Fed and not the banks that takes the hit when the price of the paper drops. When the paper hits bottom, guess who buys it back wholesale? The banks.

In other words, the Fed is being the “Sucker of last resort,” a role that’s normally reserved for investors.

A. Viirlaid February 19, 2011 at 11:19 am

Right on Brett in Manhattan, except that the “Sucker of last resort” is The American Public, not The FED.

It is the public who have to absorb the eventual costs of the FED-printed money used to buy up the Toxic Assets in the first place. That FED-net-new money is ALWAYS debasing all of the existing money. And if you believe The FED Chairman, our dear Money-System Leader Ben Bernanke, when he says that The FED will never make a ‘loss’ for The Public, well then I have some land for you in Florida, or Nevada, or California, …

Always remember, when it comes to The FED, the “Sucker of last resort” is a role that’s ALWAYS reserved for Main Street, for Joe Everyman and for Sally Everywoman, and for the average investor too, as his/her savings inevitably are bled of value by the shenanigans of The FED.

A. Viirlaid February 19, 2011 at 11:27 am

Speaking of “Turning Japanese”, for another person who has apparently “turned Austrian” please see PAUL B. FARRELL’s article from Feb. 15, 2011 titled “Fed dictator Bernanke needs to be toppled” at


A. Viirlaid February 20, 2011 at 12:55 pm

Further to this discussion, please see blogger Jeffrey Tucker’s entry at


The FED is worse than useless — the FED can never “make” employment go up, or make productivity go up, or make the Economy ‘grow’.

These things happen in spite of The FED.

Who “makes Productivity and Employment and the Economy to improve” are the people of America. The hard work and ingenuity of Americans is what allows The FED to hide behind its policies of ‘stimulation’ and money-printing. That hard work and productivity is what has allowed life to get better while hiding the true costs of The FED’s policies. The price inflation that would have occurred in the ABSENCE of Americans improving their own Economy would be HORRENDOUS — and in that case The FED would have nowhere to hide — which is where we are today.

The FED can get away with its Money Debasement over the decades (and enrich the Wall Street banks it deals with) ONLY at the EXPENSE of the American people.


Because so long as the American public can sustain the oppressive yoke (named The FED) around their collective necks, the Economy can still somehow perform, grow, and meet the insatiable appetite of The FED and of Wall Street while simultaneously returning a modicum of living to the average person.

But at some point (today) that yoke becomes so oppressive, so as to even break the back of the American public.

That day is now.

As Robert P. Murphy points out:

I should clarify that Austrians don’t believe that the current level and duration of unemployment is “natural.” No, millions of people are out of work right now because of horrible government (and Fed) policies.

And now The FED wants to ‘save’ the Economy with more net-new money creation.


More malinvestment, unviable short-term employment, more misery. Along with price inflation, The FED’s policies will deliver revolution and mayhem.

Do you really believe government statistics or do you believe your own wallet when you see how much less you can buy with your dollar today than you could even 5 years ago?

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