Economist Robert Murphy lays out the purpose and structure of his upcoming book Understanding Money Mechanics, a guide to the Federal Reserve System that is a must-read for laymen. It will be released as a bimonthly serial on the Mises Wire and then published as a book.
The original justification for the creation of another central bank did not allude to the modern goals of “full employment” and “price stability.” Rather, the pleas of the time called for an “elastic currency” that would expand or contract according to the “needs of trade.”
Mr. Volcker certainly deserves credit for curbing the Great Inflation of the 1970s. However, he also merits a lion’s share of the blame for unleashing the Great Inflation on the US and the world economy in the first place.
The repo crisis — and it is a crisis — is telling us that liquidity providers are aware that the price of money, the assets used as collateral and the borrowers’ ability to repay are all artificially manipulated.