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Source link: http://archive.mises.org/8257/the-fed-understands-itself/

The Fed understands itself

July 4, 2008 by

The former St Louis Fed president, William Poole, now consultant for California-based Merk Investments, made an interesting statement on the Fed policy tradition. In an interview with Germany’s n° 1 daily, the Frankfurter Allgemeine Zeitung, Poole stated:

In historical perspective inflation is a means to diminish the stress felt by debtors. The policy of the US central bank is construed to create inflation to alleviate that stress. Its monetary policy was, is, and will be “lax” until the economic situation, and the situation of financial firms, will be improved. All in all this will entail an inflationary tendency, even if the latter will entail a bundle of new problems in another three or four more years.

Poole here confirms the Austrian interpretation of what central banking is all about: special-interest policy in the short run, with harmful aggregate consequences in the medium and long run. Significantly, Poole made this statement only after he had left the Fed (he quit in March).


Fred July 4, 2008 at 8:34 am

Is there an available English translation of the interview?

Bruce Koerber July 4, 2008 at 10:11 am

This sword (the counterfeiting potential by the government-sanctioned money monopolist) has two very sharp edges to cut deeply into the flesh of property rights and ethical prosperity.

One is the devaluation of the money defined as legal tender to reduce the debt of the gluttonous usurpers of the Constitution by stealing from the creditors. Futhermore, this undermines the capital structure which advances the socialistic and fascist objectives of the ego-driven interventionists.

The second very sharp edge is the redistribution of wealth from those who receive the ‘dollar’ later to those who receive it early on solely because of their connection to the self-serving plans of the power elite who are redirecting resources to themselves to enhance their power and wealth.

Yancey Ward July 4, 2008 at 10:47 am

Here is a handy link for whenever you want to read a translation of something written in another language. I have used it a million times over the last year (Ok, maybe a thousand).

Joe July 4, 2008 at 11:15 am


Your second point is one that seems to escape almost every economist. Robert Reich had a post on his blog the other day titled, “The Wage Gap is being Fueled by the Gas Gap” which discussed how inflation has a far greater impact on low wage earners than the rich. His prescriptions for solving inequality range from gas tax credits for the poor to raising taxes on the “wealthy”. How he can write that headline and not recognize the connection between inflation and wealth inequality is beyond me. Raising taxes on the rich will of course not solve the “problem” he identifies because it doesn’t address the root cause – monetary inflation.

FrancisD July 4, 2008 at 1:55 pm

I’m pretty sure they have an army of economists working at the fed, helping them to predict how long they can keep the forfeiting of money going on before it starts endangering their little scam.

Because they know its doomed to collapse.

Bruce Koerber July 4, 2008 at 3:31 pm

Dear Joe,

It is hard to decipher the condition of the minds of the so-called economists in these ‘Dark-Ages’ of economic science.

Is it ignorance, is it propaganda, or is it a mix?

Deregulator July 5, 2008 at 11:56 am


Based on my observations from his TV appearances, Robert Reich is a shill for the democratic party. He stridently promotes class warfare and responds to intelligent debate by shouting down his opponents. No wonder the public has misgivings about economic discussions.

george smith July 5, 2008 at 1:10 pm

It’s not clear what the Fed personal understand.

In Greenspans book The Age of Turbulence there’s a passage on page 297 where Greenspan describes his debate with Li Peng:

“He responded by asking how, if the United States was so devoted to unregulated markets, I could account for Nixon’s wage and price controls in 1971. I was delighted that the knew to ask. Not only was he connected to the real world, but also, for a reputed hard-liner, he sounded almost reasonable. I acknowledged that price controls had been a bad policy and that their only saving grace had been to reaffirm that such controls don’t work. I added that we had not been tempted since.”

Thus does Greenspan (who at that time was controlling interest rates) say that we don’t have price controls. Does the Fed understand what they do?

Arnim Sauerbier July 6, 2008 at 10:26 am

I would love to see articles or even letters from Hülsmann published in the Frankfurter Allgemeine Zeitung. It is desperately in need of a counterweight to the Keynsian horde.

In a chat today I suffered a few minutes of trying to elucidate this fellow.

16:59 < @PlagueRat> a pure gold standard is hyperinflationary… sure, it worked well back in 1800 when the total value of the US economy only increased 0.5% a year… but with new inventions happening faster than bush family members commit crimes, there is new value added at an astounding rate. The value of the US economy increases by 3 to 10% each year. With a pure gold standard, the only way to accomidate increasing value, is inflation. The dollar stretches to cover more goods and services… so, the prices go up.

This my friends, is a product of government education.

KY Leong July 6, 2008 at 10:37 pm

Yeah, some of these “educated” idiots are so far gone, one just gives up even trying. Incidently, on govn education I recently found this piece by none other than the eminent Prof Edmund Phelps, expounding the merits of “positive” economic instituitons necessary to support the “innovation” economy:

“…capitalism has shown some good adaptations to many of the problems facing the prospective users and the prospective financiers of potential innovations. If they lack the necessary education to grasp its use and see its benefits, the intended users of a demanding innovation would not risk early adoption of it…innovators would leave such demanding innovations on the back burner, thus reducing the flow of innovation. Happily, most…of the economies that appear to possess relatively high dynamism, have instituted universities to supply the necessary education, and an appreciable proportion of the labor force has foreseen the gains for themselves…” (The Economic Prospects of Singapore, Addison Wesley, 2006, pp309)

Hmmm…here I am thinking chewing gum, condom and Chinese foot massage (the latter very popular here in Singapore). What trials and tribulations must have besieged their inventors early on without govn-assistance with “market development” – to identify and train early adopters for these revolutionary inventions?

flix July 7, 2008 at 2:48 am

schamlos! Jetzt sagt er!

Stephen Grossman December 25, 2008 at 3:05 pm

Ex-Fed bigwig, Poole, says, “Inflation is a means to diminish the stress felt by debtors. The policy of the US central bank is construed to create inflation to alleviate that stress.”

I’m stressed! I want the govt to relieve my stress! Every time I read the NYT editorial pages I must rush to my bathroom with a weak stomach and a headache. Aspirin doesn’t help. Cant the Fed relieve MY stress?!

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