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Source link: http://archive.mises.org/7923/murphy-and-hoskins-on-the-fed/

Murphy and Hoskins on the Fed

March 17, 2008 by

I join forces with an ex-Fed president in a vain attempt to stop the madness. (Purists, feel free to chastise us for not calling for the abolition of the Fed. On the other hand, this was the featured opinion piece on Forbes.com the day before the Fed meeting.)

{ 7 comments }

Brent March 17, 2008 at 2:12 pm

Just don’t get into the predictions business again! Remember oil jumped quite a bit by the end of 2007.

Dennis March 17, 2008 at 2:25 pm

I realize that this article was written for the popular press, so please do not take my comments in the wrong vein. In particular, Mr. Murphy is an excellent economist who fully understands the Austrian theory, including Austrian business cycle theory (ABCT).

One important lesson that the ABCT drives home is that attempting to stabilize the price level in periods of rising productivity will not stabilize economic activity. In fact, newly created money that first enters the economy through the loanable funds market sets in motion the boom/bust cycle. While price inflation was somewhat subdued during the 1990s, the Fed’s attempt to stabilize the “price level” during this period caused the unsustainable stock market boom, and the resulting recession in 2001.

jeffrey March 17, 2008 at 2:39 pm

That’s great Bob! If someone complains that you wrote that the Fed should keep “inflation low and evenly paced” blame your co-author.

Seriously, a nice piece. Good to seem someone making sense in these insane times.

Bob Murphy March 17, 2008 at 3:10 pm

Brent,

Just don’t get into the predictions business again! Remember oil jumped quite a bit by the end of 2007.

Fair enough, but I think I more than made up for that (he’s referring to this piece–see the end) with this and this. And I don’t think I’ve ever seen someone remind his readers as much as I did that I screwed up in that first one. :)

Also, if we want to be entirely pedantic about it, I made predictions with Hoskins in this Forbes article too. We said that if the Fed keeps cutting rates, there will be a recession with high rates of price inflation. We don’t know that a priori; maybe the demand for dollars will suddenly increase, and so prices will fall (but not as much as they would have without Fed rate cuts).

Brent March 17, 2008 at 5:58 pm

Oh, Dr. Murphy, you know I love your writings! I’m just poking you about those (seemingly out-of-nowhere) predictions you made in an otherwise great article about the benefits of international trade (which, if I recall correctly, you wrote in response to Schiff’s borderline-protectionist remarks on the subject).

Anyway, with a once through, I think your current column looks great.

chris March 17, 2008 at 11:30 pm

Bob – Great piece! It’s great to see “our guys” in Forbes. Maybe the BOMC will read it, Google your name, read your other writings, and then resign. You never know…

Brian Gladish March 18, 2008 at 12:56 pm

The scary thing is that if the “free market” advice is followed and appears to fail, Dr. Murphy’s viewpoint is discredited. Lew Rockwell’s recent article on Social Security “privatization” points out some the risks.

However, there is little chance of this advice being taken.

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