Wednesday, 22 December 2010
Mish criticises Kucinich’s bill.
Mish’s criticisms of Congressman Dennis Kucinich’s “abolish the Fed” bill are a bit harsh in places.
This bill abolishes the Fed and gives Congress the right to create new money. The bill outlaws fractional reserve banking, an aspect of the bill that Mish agrees with. So do I.
“Neither sound money nor the free market comes from printing money into existence. Arguably the only thing worse than the Fed printing money out of thin air is Congress printing money out of thing for the purpose of full employment and/or any other absurd ideas Congress has.
The last thing we need, the very last thing we need is Congress lending money into existence to pay the bills or to do anything it wants for any reason. Those looking for hyperinflation can find the roots of it in that bill.”
Now what does “sound money” actually mean? Like most ultra reasonable sounding phrases, it is near meaningless.
If by “sound money” one means keeping the money supply growth at a level that aims to maximise employment without causing excess inflation, then there is nothing wrong with “printing money into existence”. In fact “printing money into existence” has been going on ever since the Greenback first appeared.
Also, this bill does not give Congress the right to create money to fund any old form of spending proposed by any old politician. It proposes setting up a “Monetary Authority” to control money creation. Now isn’t that the fundamental flaw in the bill? That is, it just replaces the Fed with a “Monetary Authority”.
Mish’s final paragraph reads:
“All things considered, and in spite of horrendous flaws, it may be a plus that someone has actually submitted a bill in Congress to end Fractional Reserve Lending. Now all we to do is throw away the entire rest of the bill and let Ron Paul draft a proper bill ending FRL as the central idea.”