The True Believer
How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam? How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts. Today we offer a brief case study in this regard
Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT] Photo credit: Linda Davidson / The Washington Post
Minneapolis Federal Reserve President Neel Kashkari is a man with strong convictions. He is what the late Eric Hoffer would have classified as “the true believer.” According to Hoffer:
“It is the true believer’s ability to ‘shut his eyes and stop his ears’ to facts that do not deserve to be either seen or heard which is the source of his unequaled fortitude and constancy. He cannot be frightened by danger nor disheartened by obstacle nor baffled by contradictions because he denies their existence.”
For starters, Kashkari believes the Federal Reserve, an unelected board of bureaucrats, can crunch economic data into pie graphs and bar charts and draw conclusions as to what they should fix the price of credit at. Moreover, he believes that by fixing credit at the “correct” price, the Fed can somehow “optimize” the economy.
This idea is patently false. Remember, the economy is comprised of billions of people with ever changing interactions. Activities and exchanges are always adapting.
What may be the correct price of credit at one time is precisely the wrong price of credit at another. Only a free market for credit, where rates are agreed to by willing borrowers and lenders, and unobstructed by government decree, can self-correct in real time to properly meet changing supply and demand.
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