Thursday, October 20, 2011

The Fed's fatal conceit

Ron Paul has an opinion piece in today's WSJ blaming the Fed for the recent financial crisis as well as "every single boom and bust that has occurred in this country since the bank's creation in 1913."  His analysis is decidedly from the Austrian School and you can judge it for yourself.  He hits the nail on the head, however, when he points out how the Fed is afflicted with the fatal conceit that plagues too many policymakers:
In many respects the governors of the Federal Reserve System and the members of the Federal Open Market Committee are like all other high-ranking powerful officials. Because they make decisions that profoundly affect the workings of the economy and because they have hundreds of bright economists working for them doing research and collecting data, they buy into the pretense of knowledge—the illusion that because they have all these resources at their fingertips they therefore have the ability to guide the economy as they see fit.
The Fed's continued flailing about trying to be relevant is a case in point.  Having spent 12 years as a Fed economist, I can assure you that it is indeed a pretense of knowledge.