Critique this assessment of the Fed:

[Matt Collins]

I've gotten into a bit of a debate with an economist friend of mine who has read Meltdown and doesnt think the Fed is all that bad.


He sent me this link and I would like you to critique this assessment of the Fed:
http://eh.net/bookreviews/library/0158





.

[Matt Collins]

One of the things he said in a FaceBook exchange was:


"I agree with many of the points made, but I think they would have more success in convincing the public in changes if they didn't speak in absolutes. The Fed wasn't the only catalyst for the problems we are facing. The other morale hazard, and the most significant one in my mind, was Fannie and Freddie. The federal government's drive for putting poor people into houses they couldn't afford was another. The fact that we are far more successful and comfortable (even in a recession) than any other country in the world makes this a hard sell. Calling the Fed evil and saying they are ripping us off and saying they are causing unbelievable human suffering just makes their argument sound unbelievable. Yes the Fed made missteps by lowering interest rates more than they should have. It's easy to Monday morning quarterback that now. I don't claim to be an expert, even though I've read quite a bit about the Fed, but I've seen very convincing arguments for their existence"


.

[jmlfod87]

i'm tired and kind of drunk so i only skimmed it, but heres the kist:

the piece argues that the role of the Fed is to PROMOTE the dollar as an international currency. This goes against the Fed's history in that it has succeeded since its founding in devaluing the dollar by 97%. The main reason the dollar came out as the global reserve currency is that our economy was the least damaged after WW2, thus making our currency the strongest. The FEd had nothing to do with making our currency of international prestige.

the quote you got from him actually kind of shows he didn't even read meltdown. Woods spends the first quarter of the book talking about fannie and freddie in great detail. woods also talks about the community reinvestment act which also encouraged the leveraging of subprime.

not only has your debater not read meltdown but his analysis is clearly flawed. he blames fannie and freddie for a lot of the crisis but as Woods points out in Meltdown, the subprime market didn't cause the crash. The prime housing market was just as bad as subprime, if not worse, thus the GSEs and government policies to encourage lending to subprime mortgages cant account for the majority of the housing bust, considering the prime market was just as bad as subprime.

i hope i was somewhat coherent, if not, blame the booze.