Should We End the Fed? Can We?
Abstract
Should we end the Fed? If so, can we? The first question is largely verboten among academic economists. We discuss the Fed’s consequences for U.S. macroeconomic performance and its compatibility with basic democratic norms. The Fed’s failure to improve macroeconomic outcomes and its tendency to exceed its legislative mandate suggest that economists are far too quick to dismiss the question of alternative monetary institutions. The second question is insufficiently examined by the Fed’s critics. The key constraints are not domestic and economic but international and political. For decades, U.S. policy has promoted and maintained dollar dominance within the international monetary system. The Fed is a crucial institutional support for geopolitical goals. Eliminating the Fed would likely be inconsistent with those goals. Hence, major fiscal and strategic changes must precede any attempt to end the Fed.
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