The Fed

The Federal Reserve has not only mismanaged the US economy; even its own "portfolio" is underwater.

The Fed's predictable response to inflation is based on erroneous economic thinking common with Keynesians. Only a free-market approach can reduce inflation and restore true market interest rates.

Historians praise the US entry into World War I because it enabled an Allied victory. But it also led to the economic disasters of the 1920s and ’30s.

While we speak of a desire for honest money, the larger problem is that the Federal Reserve System cannot coexist with an honest money regime.

As the inevitable economic downturn becomes more evident, the Fed will attempt to stop deflation. But what this economy needs is a good dose of it.

Even with near-record inflation, the US dollar still has gained strength relative to other currencies. This does not mean that the Fed has been acting responsibly.

In a free market, short-term and long-term rates would move toward convergence. Fed interference with interest rates ensures that won't happen.

As the economy moves into recession, government and Fed officials will increase intervention. If they want an economic recovery, the best course is to permit free markets to work.

While much attention has been directed toward Ben Bernanke's Nobel, the banking theories of Nobel winners Douglas Diamond and Philip Dybvig also need a second look.

As the inevitable economic downturn becomes more evident, the Fed will attempt to stop deflation. But what this economy needs is a good dose of it.