Tuesday, March 24, 2015

Scott Sumner vs The Fed

Not sure if you've noticed, but I haven't dedicated many, errr... any... blog entries to monetary policy.  This is because when it comes to monetary policy... I'm an expert.  Hah.  Nope.  It's the other way around.  I'm most definitely not a monetary policy expert.  Just like I'm not an expert on the government's environmental policy.  Or the government's foreign policy.  Or the government's military policy.  There are many things that fall under the current scope of government.  Monetary policy is just one of them.

When I was a libertarian... I was interested in defending my perspective on the proper scope of government.  But now that I'm a pragmatarian... I'm more interested in defending my perspective on how we should use the invisible hand to determine the proper scope of government.

So because I'm more of a big picture guy... I tend to skim... more than a bit... when it comes to Scott Sumner's posts over at EconLog.  Sumner is most definitely a monetary expert.  It's pretty easy to tell given that nearly all of his posts are on the topic of monetary policy.

Here's Sumner's most recent blog entry... Is Stanley Fischer too complacent?  While skimming over it I imagined Sumner encouraging readers to boycott the Fed.  I really enjoyed the image so here I am sharing it with you!

With the current system, I don't think that Sumner would ever say this.  Right?  How can we possibly boycott the Fed?  At best we can write a strongly worded letter to the Fed...

Dear Stanley Fischer, 
It has come to my attention that it is entirely possible that you are too complacent.  This concerns me a great deal.  Please be more... diligent.  If you fail to do so then I will be forced to... use stronger words.   
A Concerned Citizen

Would Fischer really be inclined to take heed?  Not according to Tabarrok...

It’s the threat of exit that makes people listen. - Alex Tabarrok, The Tragedy of Jonathan Kozol

I can't exit from the Fed, so why should Fischer listen?  Maybe he'd listen to congress instead?  So I should write my congressperson a strongly worded letter?  If this was the only system that I'd ever been exposed to... then it might seem like a pretty decent system.  But when I compared our political system to a market system... well... now I'm a pragmatarian.

With the current system... it would never make sense for Sumner, a monetary expert, to encourage a boycott of the Fed.  No matter how complacent Fischer was... no matter how tight or loose money was... no matter how many wheelbarrows of cash it took to pay for one loaf of bread... with the current system it would never be logical for Sumner to encourage his readers to boycott the Fed.

It's got to be a huge problem that with our current system it will always be illogical for Sumner to encourage readers to boycott the Fed.  Pragmatarianism would solve this problem.

In a pragmatarian system it would certainly be logical if Sumner ever encouraged people to boycott the Fed.  This is because in a pragmatarian system people could choose where their taxes go.  Anybody who had been cultivating the Fed with their cash... would easily be able to stop doing so (exit).

How bad would the government's monetary policy have to be before Sumner encouraged his readers to boycott the Fed?  Kinda bad?  Really bad?  Super bad?  And if Sumner did encourage his readers to boycott the Fed... how much money would the Fed lose?  A little?  A lot?  If it was only a little... how many other monetary experts would have to support the boycott in order for the Fed to get the message?

Here's another good question... how many more people would pay closer attention to Sumner's expertise if we could actually choose where our taxes go?  I often find myself explaining to people that pragmatarianism would eliminate rational ignorance.

I really want to live in a world where Sumner, a monetary expert, has the option to encourage his readers to boycott the Fed.  I really want to live in a world where I can clearly see exactly what the demand is for the government's monetary policy.  I really want to live in a world that has demand clarity rather than demand opacity.  I really want to live in a world that's enlightened.

Sumner, a monetary expert, is wondering whether Stanley Fischer is too complacent.  And I'm wondering whether Sumner would give any of his taxes to the Fed if he had the freedom to do so.  Sumner's actions would speak a lot louder than his words do.  His demand for the Fed is one piece that is missing from the puzzle.  Unfortunately, it's not the only piece that's missing.  Most pieces are missing from the puzzle.  And then there's a big mystery when we experience economic problems.

In this video you can see puzzle pieces coming together...

Why are so many economists complacent about the fact that we don't know what the demand is for government policies?  Just how great is "demand" anyways when we don't need it for monetary policy, environmental policy, military policy or any other government policy?  If we don't need demand to determine the supply of money... then why do we need demand to determine the supply of milk, shoes and cars?  Eventually economists are going to have to confront this question... let's just hope that they do so sooner rather than later.

See also...

Hyperinflation in the Weimar Republic
Holocaust - The Extremely Inefficient Allocation Of Jews

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