Don’t Fear the Fed

Federal Reserve Building, Washington DC.

In the mid-1960s, Liberty Fund’s founder, Pierre Goodrich, decided to travel to Montauk, Long Island and rent an apartment overlooking the ocean. He arrived there with his wife and top personal assistant and spent a month reading Ludwig von Mises’ most important work, Human Action (1949). Such was Goodrich’s commitment to understanding the classics of liberty and such were his resources that he went to great lengths to read and contemplate one of the great works of 20th century Austrian economics.

Let’s suppose you are not a multimillionaire businessperson with the time and dedication to live by the ocean and read the great works of Mises and other Austrians. Fear not—John Tamny’s excellent, accessible, and surprisingly provocative Who Needs the Fed? will save you the cost of a beachfront rental on Long Island and give you a nice introduction to one of Mises’ other classic works, The Theory of Money and Credit.

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Risk Doesn’t Stand Still

Insurance concept

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe explores the movement and transformation of risks in adapting, self-referencing systems, of which financial systems are a notable example. In this provocative new book, the Wall Street Journal’s chief economics commentator Greg Ip contemplates how actions to reduce and control risk are often discovered to have increased it in some other way, and thus, “how safety can be dangerous.”

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Searching for Loyalty and Prudence

royal_bank_of_scotland__p316d_1917_£1_the_royal_bank_of_scotland_

In his provocative and knowledgeable new book, Other People’s Money: The Real Business of Finance, John Kay considers the complex ways that financial systems operate in between the real savers, on one hand, and the real investments, on the other.

He observes disapprovingly how very large contemporary financial systems have become, how much talent they absorb, how big are the bonuses they pay, how they often have lost sight of their basic fiduciary duty, and especially that “volumes in trading in financial markets have reached absurd levels.”

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Make Banks Bear the Moral Hazard, but Not Yet

deutsche bank

We all laugh at horoscopes and the people who read them, but I am not sure the financial pages of our newspapers (or the people who read them) are much better. Had I, for example, never read a single article in them, not only would I have been none the poorer, but I suspect I would have been none the less wise (or foolish).

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Vice-Squad

bigshottrailer

Bizarro hedge-fund manager Michael Burry (Christian Bale) creates credit-default swaps and hangs tight when investors in his fund see their money disappearing before the bubble bursts. Deutsche Bank trader Jared Vennett (Ryan Gosling) and de facto partner Mark Baum (Steve Carell) figure out the risk to the whole economy that this bubble created, thanks to collateralized debt obligations that have grown much larger than the thing being securitized. Boulder, Colorado garage investors Charlie Geller and Jamie Shipley (John Magaro and Finn Whitrock), who get in on the action thanks to former Smartest Guy in the Room Ben Rickert (Brad Pitt), decide to blow the whistle when a disgusted Pitt reminds them that their cashing in requires the economy to collapse. The economy collapses. Nobody goes to jail.

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The Great Regulation Caused the Great Recession

Housing Crisis

There are so many canards about our dear, departed Great Recession of 2007 to 2009. Some favorites:

Deregulation caused it.

The government had to bail out Wall Street from its own mess.

The stimulus bill of 2009 stopped an economic free fall and forestalled a second Great Depression. (This last is why Hillary Clinton, on the stump, gives President Obama an “A” for his economic policy.)

The thing about canards is that they cannot help but contain a pointer toward the facts. Their evasiveness and stridency create a sort of outline, in shadow, of the very reality that it is the point of canards to suppress and obscure. Prevarication, as Shakespeare had it, protests too much.

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