Jon Stewart is a Genius
Jon Stewart asks Alan Greenspan an excellent question:
Why do we have a Fed? Why do we have someone adjusting the rates if we’re a free-market society?
Alan’s answer is not satisfying, but I don’t blame him: The economics profession does not have a good answer. We economists have rigorous and fundamental theory to explain why we have environmental regulation (externalities) and to explain why we have antitrust laws (market power), but there is no consensus about what market failure calls for the existence of a central bank. The answer has something to do with the benefits of a system of fiat money. And it has something to do with the possibility of short-run monetary nonneutrality…
Nice post from the recent Chairman of the Council of Economic Advisers to President Bush and current Harvard professor. If I remember right he was in consideration to serve on the Fed. I also don’t think he is questioning the regulatory role of the Fed but the interest rate and monetary policy.
Related: Bernanke Calls for Stronger Regulation of Mortgages – Investor Protection Needed – What is the Fed Funds Rate?