End the Fed.
We should not have an economic politburo in this country trying (and failing over and over) to plan the economy.
This is what many people do not understand about American “capitalism.” With a central bank at the center manipulating rates our system can’t rightly be called “free,” or free market, or free enterprise based, or capitalist at all. It is crony capitalist. That is to say government centered with private interests benefiting at the expense of an actual free economy. (And free people.)
The Federal Reserve’s changing of the guard — the end of the Janet Yellen’s tenure and the beginning of the Jerome Powell era — has me remembering what it was like to grow up in the former Soviet Union.
Back then, our local grocery store had two types of sugar: The cheap one was priced at 96 kopecks (Russian cents) a kilo and the expensive one at 104 kopecks. I vividly remember these prices because they didn’t change for a decade. The prices were not set by sugar supply and demand but were determined by a well-meaning bureaucrat (who may even have been an economist) a thousand miles away.
If all Russian housewives (and house-husbands) had decided to go on an apple pie diet and started baking pies for breakfast, lunch, and dinner, sugar demand would have increased but the prices still would have been 96 and 104 kopecks. As a result, we would have had a shortage of sugar — a common occurrence in the Soviet era.
In a capitalist economy, the invisible hand serves a very important but underappreciated role: It is a signaling mechanism that helps balance supply and demand. High demand leads to higher prices, telegraphing suppliers that they’ll make more money if they produce extra goods. Additional supply lowers prices, bringing them to a new equilibrium. This is how prices are set for millions of goods globally on a daily basis in free-market economies.
In the command-and-control economy of the Soviet Union, the prices of goods often had little to do with supply and demand but were instead typically used as a political tool. This in part is why the Soviet economy failed — to make good decisions you need good data, and if price carries no data, it is hard to make good business decisions.
When I left Soviet Russia in 1991, I thought I would never see a command-and-control economy again. I was wrong. Over the past decade the global economy has started to resemble one, as well-meaning economists running central banks have been setting the price for the most important commodity in the world: money.