Subject: Re: Rothbard's AGD

From: An Claidheamh Ceilteach <[email-masked]>
Date: Mon, 1 Jul 1996 16:53:51 -0400 (EDT)

To Bryan Caplan (mostly)--

You seem to be denying that the Fed causes systematic malinvestment, and 
claiming rather that only sudden, unexpected changes in policy can hurt 
the economy.  Historically, however, the business cycle has been systematic 
and regular, implying that whatever policies are the cause have not been 
sudden erratic shifts but rather continuous, institutionalized (if you 
will) interference with the market.

Doesn't your theory rely on the notion that the Fed's interest rates 
correlate to the hypothetical market interest rate?  For example, if 
money demand goes up, the interest rate will rise.  But interest rates, 
as a form of price control, are a very blunt weapon.  Sometimes money 
demand will not go up, but cost-push inflation occurs, and the Fed 
foolishly raises interest rates to forestall the inflation.  The result 
is a surplus of funds for lending, because interest rates are above the 
market level.  Don't surpluses and shortages of money have the potential 
to cause serious adjustment problems in the economy?

Or maybe I was confusing your position on the economy as a whole with 
your position on the stock market only?

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Jason P Sorens  |Air an WWW aig http://www.wlu.edu/~jsorens/gaelic.html

"So go ahead and kneel or bow
I will choose to stand, to be my own
Until the end"
Solitude Aeturnus
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