Paul Volcker Never Was Precisely Because Monetarism Never Was, Nor Is
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WASHINGTON – MAY 14: Former Federal Reserve Chairman Paul Volcker testifies before the Joint … More Economic Committee May 14, 2008 on Capitol Hill in Washington, DC. The full committee met for a hearing on “Wall Street to Main Street: Is the Credit Crisis Over and What Can the Federal Government Do to Prevent Unnecessary Systemic Risk in the Future?” (Photo by Win McNamee/Getty Images) Getty Images Prices are what organize the market economy, which means prices are a crucial form of communication that governments should never, ever meddle with. Too bad Milton Friedman’s monetarism continues to shrink the discussion of what’s 3rd grade (money), but at the same time thank goodness the only closed economy is the world economy such that the Fed can’t remotely do what Friedman’s disciples imagine it can. Take a recent piece by Mercatus scholar Patrick Horan, in which he confidently asserted that “the Fed should respond only to demand shocks, unexpected events affecting the demand for goods and services. Monetary policy is well-suited for stabilizing these sorts of disruptions.” While the conceit of economists never disappoints, a piece calling for central planning from historically free market Mercatus does. Which is a digression. The main point is that while market intervention is never wise simply because central planning always fails vis-à-vis market forces that are information pregnant by their very name, intervention is most problematic when so-called “demand shocks” move the alleged price level. If we ignore that there’s no such thing as “demand shocks” since demand always and everywhere mirrors supply, and that market-good specific price rises borne of specific demand increases signal falling prices elsewhere (that is, unless economics is no longer about tradeoffs…), it’s very necessary that prices reflect reality as opposed to the information suffocating effects of intervention. So, while it’s…
Filed under: News - @ April 20, 2025 2:10 pm