Federal Reserve Logic

Go Away Federal Reserve System!

Go Away Federal Reserve System! (Photo credit: r0b0r0b)

In any system of deduction, the truth of a statement depends upon the truth of the statements from which it is logically derived. If a preceding condition is false, then the deductions derived from that statement may not be true – they certainly are not supported by logical argument.

The Federal Reserve is taking a lot of heat these days. When The Daily Capitalist joined in, it noted that one underlying premise of the Fed is that “ they as technocrats can manipulate money supply for the good of the economy”. This does indeed seem to be one of the underpinnings of the Federal Reserve system.

But where does this statement come from? Is it logically derived from some higher level truth? Or is it just a belief unsupported by logic?

Clearly the Fed can manipulate the money supply, but can they do it for the good of the economy? I can accept that the Fed folks are people of good will and good intent, but by what logic does anyone believe that they can actually “manipulate money supply for the good of the economy”.  I can find no logical basis for this belief and a lot of evidence to the contrary.

Good intentions are better than bad intentions, but good intentions alone won’t get the job done. Without a logical argument supporting the Fed’s mission, I’m willing to pay more attention to those who argue that our institutional structure is seriously flawed.

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