The Economic Crash that Cured Itself: A Conversation with James Grant

Grant

What if a profound economic downturn occurred and the federal government basically ignored it? Couldn't happen, right? In his latest book, The Forgotten Depression, James Grant details for us the depression of 1921 and how it was permitted to cure itself. We discuss in this podcast how the Wilson* and Harding administrations let prices and wages fall, balanced the budget, and raised interest rates through the Federal Reserve. The result was a painful and, more importantly, quick depression that righted itself by late 1921, setting the stage for the economic growth of the 1920s. The comparisons are easy and telling. The…

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A Cheer or a Bronx Cheer for the Fed?

Federal-Reserve-BuildingIn the financial crisis of 2007 through 2009, the Federal Reserve expanded its balance sheet to finance the bust, just as intended by its legislative fathers of a century ago. They did not, of course, intend for their creation to have stoked the housing bubble in the first place. This dramatic action to make up for its own mistakes was not a first—recall the Fed’s celebrated anti-inflation strategy of the early 1980s, a reaction to its 1970s blunders that had created the Great Inflation of that previous time.

The latest crisis has been over for five years, but the Fed’s balance sheet is more bloated than ever. Its much-discussed “taper” only slowed down the rate of bloating.

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The Fundamental Left-Right Divide

In her first formal appearance as head of the United States Federal Reserve, Janet Yellen obliquely suggested the Fed might not raise its mighty “federal funds” rate to tighten the economy until months after its Quantitative Easing bond purchasing ended completely, coyly portending cheap money indefinitely. The market shuddered but soon calmed at the soothing voice of its controller.

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The Marriage of Governments and Banks—For Better or for Worse

Charles Calomiris and Stephen Haber, combining their scholarly command of banking and political institutions, have published a book full of fertile ideas, instructive histories of the evolution of a number of banking systems, and provocative interpretations of the co-dependency between banks and governments.

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Friday Roundup, February 7th

February's Liberty Law Forum engages the questions of what is American liberty and what is required to support it. Lead essay by Ted McAllister with responses from Bradley Thompson, (and upcoming) Steven Grosby, Bill Dennis, and Hans Eicholz. Getting from aid to enterprise: The next Liberty Law Talk discusses with Michael Miller, director of the Acton Institute's PovertyCure documentary, the conditions that should guide any approach to assist human flourishing in the poor regions of the world. Frequently missing, Miller highlights, in current interventions is an understanding of how crucial the rule of law, property rights, and markets are in the…

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Friday Roundup, October 11th

Edmund Burke studies: Bruce Frohnen makes an appearance in our feature review this week and takes a new book on Edmund Burke to task: In a rather facile first chapter, “Burke in Brief: A ‘Philosophical’ Primer,” Maciag goes further, dismissing Burke as a political philosopher by asserting that “whatever ‘philosophy’ Burke expounded was extracted by others from his pamphlets, letters, and orations, which were produced in the heat of political battle.” Minimizing Burke’s explicitly philosophical and aesthetic works, Maciag also eschews engagement with the substantial literature on the philosophical underpinnings of prudence and the commitment to tradition (one need only mention…

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Debt? No Prob

Come tomorrow or whatever, the government may not open. (They’re closing down all “non-essential” offices, such as the Department of State: we’ll be leading from way behind. Any office that doles out money will remain open.) Soon in this theater: the debt ceiling, and more needless contretemps. The easy solution comes (as often) from my buddy Alex Pollock. In this case, he cheerfully concedes that the idea wasn’t his but President Eisenhower’s, way back in 1954: In order to keep making payments, the Treasury increased its gold certificate deposits at the Federal Reserve, which it could do from its dollar “profits”…

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Friday Roundup, September 6th

"Is the Federal Reserve Constitutional?" Essays in this month's Liberty Forum from Peter Conti-Brown, Richard Timberlake, and Gerard Magliocca consider different aspects of this important question. "The Legal Historian as Entomologist" is this week's review essay of David Rabban's Law's History: American Legal Thought and the Transatlantic Turn to History. John McGinnis' essay concludes that legal history's real work is in probing the historical meaning of fixed texts rather than charting the history of the evolution of the common law. Insofar as originalism continues to gain currency, it makes history directly relevant to current law. But rather than to trace a concept…

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Friday Roundup, April 26th

The current Liberty Law Talk is a discussion with Paula Baker on her new book, Curbing Campaign Cash. You might recall former FEC Commissioner Brad Smith’s review of the book in this space. Before Super PACs, McCain-Feingold, “soft money,” and the Keating 5; before Watergate, and even before Teapot Dome, there was the Michigan Senate race of 1918. . . . one of the nation’s most contested elections and earliest campaign finance “scandals. . . . Unlike the typical political saga, however, Baker presents the story not as a morality tale of honest government corrupted by big money, but rather as…

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