Hey, here’s a shock. Robert Rubin loves the Fed! I can’t believe it. It’s not like Robert Rubin has profited handsomely (to put it very mildly) under the central banker planned economy.
Here’s what’s frustrating for many of us in the Fed critic world. So few people really want (to try) to understand money. Money can be a scary thing. Most people just know that they want more of it (nothing wrong with that) and they leave the high finance stuff to the guys who periodically show up as guest hosts on Squawk Box. (Which in most regards is perfectly reasonable.)
The Federal Reserve must be there for our good – because that’s what they tell us. And shoot, I have no way of knowing whether they are working for me or against me anyway so I might as well just go with what they say. Money is magic. Money is beyond me. I just want a decent interest rate on a 4 bedroom house in the suburbs. So what if it’s all make believe? I have no idea anyway.
And gold? Doesn’t Scrooge McDuck pile that stuff in his basement or something? I mean, I can barely cover all of my bills. I live in debt. How could I even think about owning gold? That’s for people not like me. I don’t care if we have a “fiat system” whatever that means anyway. Who cares?
And so people like Robert Rubin roll on, amassing wealth and power as the wealth and power of the middle class slowly but surely erodes with each passing year thanks to the opaque, centrally planned financial system folks like Robert Rubin negotiate and exploit.
And just to be clear – central planning ain’t capitalism.
Rubin’s big miss, though, comes in a paragraph that blames the Fed’s inaction for bank failures in the 1930s and for inflation in the 1970s. He writes, “During the early years of the Great Depression, for example, instead of using its lender-of-last-resort powers, the Fed stood by while roughly 40 percent of America’s banks failed. And these bank failures contributed greatly to the severity and duration of the Depression.”
Yet an economist at Columbia University, Charles Calomiris, notes that one reason the banks were failing was what he calls “currency risk”:
Depositors had reason to fear that President Roosevelt would leave the gold standard, which gave them a special reason to want to convert their deposits into (high-valued) dollars before devaluation of the dollar.