David Stockman was the Budget Director for the first half of the Reagan administration. This is an edited version of an interview he did with Reason.TV, which is a libertarian group. An hour-long unedited version is also available on YouTube.
Stockman was controversial among “true believers” as he was being candid that the growth in military spending under Reagan was out of control and the debt it was causing was going to crush us down the road. 30 years later, here we are.
Since leaving public service, Stockman has warmed up to the ideas of libertarian economics – at the end of this video, he gives a strong endorsement that Ron Paul is the only one in Congress who seems to “get it” on why things are spinning out of control.
Now as before, I agree that RP “gets it” about many things that are important. And I still lament that, additionally, he is misinformed if not clueless about others.
Ron Paul is going to have a tough decision to make. Right now, his understanding of the Federal Reserve is fairly abstract, similar to the way Candidate Obama was free to be abstract about things like wars and prisoners.
Two of my older polls asked “what does the Federal Reserve do?” and “if you dissolved the Federal Reserve, who would perform those functions?” or something close to that. “let’s close the Federal Reserve” is as silly as the Beaty pageant contestant who wants world peace. The Devil is in the details.
The day to day banking actvities the Fed does – clearing checks, running Fedwire, getting currency and coins to banks, making sure banks are following the law are very necessary functions that are apolitical.
The Fed also manages the checking account for the US treasury, processing tax payments and paying checks drawn on Treasury bank accounts, similar to the way you use a retail bank to keep track of your money.
The controversial part of the Fed is its role in monetary policy – using tools it has like setting interest rates and lending money to other Central banks. If you don’t want the Fed doing that, who should? The Treasury secretary? The “Market?” Congress?
I was reminded the other day that prior to banking deregulation, the interest rates that banks paid on Savings accounts was set by the government. If the maximum rate was 5 1/4%, everyone gave the same rate. That’s back when they had to give out toasters to attract deposits and stay within the law.