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Tom Woods Ponders What’s Really Wrong with the Federal Reserve

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The Federal Reserve manipulates interest rates, creates money out of thin air, blows up asset bubbles and generally wreaks havoc on the economy. But some people have found an even more insidious problem with the Fed.

It’s not “diverse” enough.

Historian Tom Woods offered up some pretty sharp observations about this latest “outrage” in a recent email. And lest you think this is just a screed against left-wing social justice warriors, he has some sharp words for Republicans too. There’s pretty much bipartisan agreement when it comes to the “indispensable” nature of the Fed.

“Ron Paul is a kook,” said fashionable opinion in 2007.

Oddly enough, this “kook’s” views of monetary policy, foreign policy, and domestic policy were pretty close to Thomas Jefferson’s, from what this historian can see.

In September 2008, Herman Cain declared the U.S. economy absolutely fine, even though one week later Fannie and Freddie would be nationalized. The Tea Party didn’t seem to mind.

Meanwhile, Ron Paul, speaking on the House floor in 2001, warned that the Federal Reserve was replacing the dot-com bubble with a housing bubble, and described to a T what was surely going to happen.

And it did.

Yet the number of people listening to right-wing radio who found this impressive was shockingly low.

Practically no one saw the 2008 crash coming, Republicans included. They were too busy repeating talking points from 1983.

This one man tells you precisely what’s going to happen, and has actually read the relevant sources, and yet most people yawned. “Ah, who cares — I don’t like his foreign policy.”

That’s extremely strange.

The Federal Reserve isn’t supposed to be mentioned in American politics. The more in the dark we are about it, the better our political class likes it. But if you don’t mention the Fed, you can’t give a good free-market explanation of the crisis. There is no plausible story about what went wrong without the Fed.

So it turns out that in politics, quite literally the only person who could give a compelling account of the crisis from a free-market perspective was Ron Paul.

Ron Paul — that weirdo, remember — explained to Americans that it wasn’t “capitalism” that caused financial crises. It was the Fed and its interference with interest rates that sowed the seeds of the bust. Nobody else on the debate stage knew anything about this.

They should have, of course. What conservative worth his salt is unfamiliar with Ludwig von Mises, whom Ronald Reagan admired? Had they read Mises, they would have known the cause of the financial crisis.

Meanwhile, check this out:

There are people complaining that John Williams might be chosen to head the Federal Reserve Bank of New York.

Is that because Williams reflects the same old thinking that caused the crisis? Is it because he thinks monetary “stimulus” is what a depressed economy needs — as if the problems caused by artificially low interest rates could be solved by still lower interest rates?

Nope.

It’s because he’s white.

A group called Fed Up wants more “diversity” at the Fed. Not intellectual diversity, of course. We just want black, Hispanic, and female supporters of stimulus.

Heaven help us.

And Senator Cory Booker wrote, “The New York Fed has never had a woman or a person of color at its helm, and the Federal Reserve Bank only just last year added its first black regional bank president. If we’re serious about creating an inclusive and sustainable economy, no one should be left on the sidelines.”

Zero curiosity about how Fed policies and the economic instability they fuel might hurt people “on the sidelines.” Booker thinks racial bean-counting is what matters.

All the way back in 2009 I brought the pro-market, anti-Fed message to a packed house at the notoriously left-wing University of Colorado at Boulder.

Check out what happened.

You can subscribe to Tom’s email list here.

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