The Great Pretenders
What Do Federal Reserve Chairmen Really Know?
NOVEMBER 01, 1998 by SHELDON RICHMAN
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.
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