The Great Pretenders

What Do Federal Reserve Chairmen Really Know?


Filed Under : Federal Reserve, Central Planning

William McChesney Martin, Jr., who was chairman of the Federal Reserve from the Truman through the Nixon years, died last summer. According to the New York Times obituary, Martin hated inflation and deficits. Further, he had a reputation for jealously guarding the Fed’s independence and resisting presidential and congressional pressure to lower interest rates. Before taking the Fed’s helm, he was the first paid president of the New York Stock Exchange, and after World War II, he ran the Export-Import Bank. His father, a St. Louis banker, helped draft the Federal Reserve Act for President Woodrow Wilson and served as president of the St. Louis Fed.

Ordinarily, we wouldn’t take note of the passing of a retired central banker, but Martin said something that deserves recognition here. In a 1985 interview with the Times he recalled his early days running the Fed, at which time he said to himself:

My gracious, here I am the new chairman of the Fed and I’m doing my best—I’m not the brightest fellow in the world, but I’m working hard on this—and I haven’t the faintest idea of how you figure the money supply. Yet everybody thinks I have it at my fingertips. [Emphasis added.]

Then Martin told the Times: “They don’t really know what the money supply is now, even today. They print some figures—I’m not trying to make fun of it—but a lot of it is just almost superstition.”

It is interesting to have someone like Martin confirm what many advocates of free banking have long claimed, namely, that central bankers are much like the Wizard of Oz. Behind the awesome display of apparent power and wisdom are a few well-intentioned, fallible human beings pulling levers, turning wheels, and pretending to know things they can’t possibly know.

* * *

Advocates of the command-and-control approach to environmental issues implicitly assume that there is no commercial reason for entrepreneurs to preserve wilderness areas and other potential recreational amenities. In an excerpt from their recent book, Enviro-Capitalists, Terry Anderson and Donald Leal show that, in fact, reasons abound.

In our reprint honoring the 100th anniversary of his birth, FEE founder Leonard Read speculates about what would happen if we voted “by turning our backs” on irresponsible candidates.

The days of government fiat money may be numbered. What could hasten the end of this most mischievous form of intervention? Technology, explains James Dorn.

The Internet has its roots in a computer network funded by the federal government to link defense researchers around the country. That origin has been cited in support of a variety of government-financed projects. Andrew Morriss says there’s a lot more to the story.

The antitrust suits against Microsoft have come in for much criticism. But PC-industry pioneer Dan Fylstra asks a novel question: wouldn’t there be more to fear from a wealthy Microsoft in a regulated computer industry driven by political influence?

The U.S. Department of Agriculture wants to define the term “organic food.” As Sam Kazman shows, that’s almost as if the government had decided to define the one true religion. There’s trouble ahead.

Senate hearings on Internal Revenue Service abuses have yielded yet another taxpayer-protection law. But if the past is any guide, James Bovard writes, skepticism is in order.

During the recent unsuccessful attempt to raise the minimum wage, Democrats claimed it would help low-income workers. Republicans said it would throw people out of work. It’s not that simple, says Richard McKenzie.

A growing movement believes that corporations should do more than merely make money for their shareholders. Even some businessmen take that position. John Hood untangles the issues that make up the corporate-responsibility crusade.

Government regulation burdens business, particularly small business. And as Ray Keating demonstrates, it often creates an irresistible incentive for small businesses to stay small.

Many states of the Union are going after the tobacco industry to recover money they’ve spent on citizens’ smoking-related ailments. Daniel Hager asks why state governments are entitled to recovery, considering that it’s not their money and that one person’s medical bill is several persons’ windfall.

Columnist Lawrence Reed discusses the horror of civil-asset forfeiture. Doug Bandow considers the spectacle of a group of old people who miss the Bolsheviks. Dwight Lee argues that government price ceilings really can’t lower the cost of products. Mark Skousen continues his series on gold. And Charles Baird explains why workers in California lost a chance to stop unions from spending their money on politics. Immigration harms the environment? Turn the page to see why “it just ain’t so.”

Books by Richard Rorty and Michael Lind come under the watchful eyes of our book reviewers, along with works tackling the subjects of sports subsidies, American cities, individualism, the war against the automobile, and predatory tax policies.

—Sheldon Richman


November 1998



Sheldon Richman is the former editor of The Freeman and, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families.

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December 2014

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