John Tamny, WTF?

“Danielle DiMartino Booth And Ron Paul Both Miss The Federal Reserve's Rising Irrelevance”; so writes John Tamny at Forbes.  Tamny is reviewing a book written by Booth; the review is at Forbes, which makes you click through six pages to read it all.

Out of the six pages at the online site, Tamny touches on Ron Paul in the first couple of paragraphs.  That’s it.  Apparently throwing “Ron Paul” in the headline is clickbait.  Hey, it hooked me in.

Since Tamny wasted my time, I figured I should get something in return….

So while Paul has long failed when it’s come to making a case that the Fed matters very much, Booth doesn’t succeed when it comes to making a case that the Fed is necessary.

I don’t care much about the “Booth” part; I would like to consider the “Paul” part.

OK, so what about the Fed doesn’t matter very much part?  Does the Fed not matter as a backstop?  Would the bankruptcy of every major money-center bank not matter very much?  What of 2009?  What of the several Greenspan interventions?  Does not such a backstop matter, even when it isn’t used?  Does this knowledge in the market alter behavior significantly?

Do banks not act differently because of this?  Do private, non-bank lenders not act differently because of this?  Do investors not act differently because of this?  Do failed institutions get to continue failing because of this?  Does the facilitation of liquidity for government debt not matter much?

To ask these questions is to answer these questions.

Though Paul’s belief that the Fed is the source of myriad U.S. economic ills doesn’t stand up to basic scrutiny…

The track record since 1913 – and especially since 1971 – would suggest otherwise.  The bubbles blown and exploded would suggest otherwise.  While neither the Fed nor the money-center banks are the primary source of market credit, it cannot be denied that the money-center banks – those with access to Fed credit – are the foundation for much of the further credit in the market. 

Ask any private lender or investor: what happens if JP Morgan shuts it down because the Fed doesn’t step up in the next 2009?  It doesn’t matter at all that money center banks provide a fraction of the market’s credit.  Watch how fast the private players suck it in.

Every market participant knows this.  Why doesn’t Tamny?

PS: I found this piece by Tamny as it was featured in Jacob Hornberger’s daily email.  Why would Hornberger publicize something that downplays the role of the Fed?  Especially given Hornberger’s anti-war and anti-interventionist views, why project the idea that the Fed does not matter – given the complete interconnectedness of central banking and perpetual war-making capability?