Keeping The Federal Reserve

Capital encompasses more than material goods. That's point number one. Point number two is that capital can, indeed, result from an increase in money supply. The counter-side to that coin is inflation. While it's a viable argument, it isn't to the extent my libertarian friend makes it out to be. I call this hyperbolic argument the imaginary Inflation Monster, a wickedly evil creature of monetary policy which unleashes a plague of harmful inflation when the government intervenes in a way meant to lower unemployment. However, the empirical evidence shows that money can be inflated with an increased money supply and still increase employment rates. The worst example of this is Weimar Republic, and nobody is anywhere near considering imposing that kind of inflation. To be blunt -- the Inflation Monster doesn't exist. Increasing money-flow can increase demand, which drives up employment. This is good, when one considers the GDP loss resulting from a decreased employment, in addition to an increase in the usage of social safety nets. I don't know why my opponent tied the boom/bust cycle back into artificial inflation. He completely ignored my point on basic supply and demand as a cause for boom/bust cycles. I ask that my opponent not rebut my points by falling back on talking points. The other leading causes of the boom and bust cycle (stock bubbles, credit expansions, a lack of demand with an overabundance of supply, and even a lack of optimism on the part of investors) also have little-to-nothing to do with the interest rates being set by the Federal Reserve. The Federal Reserve is the solution to the bust, not the cause. The cause is actually the free market. I'm also unsure where the idea that the Federal Reserve exists to finance wars comes from. Considering the last two wars we had were paid for on 10-year treasury bonds, and the Federal Reserve only holds $1.6 trillion in US debt, this idea seems unfounded. I stated earlier this misconception in regards to the central banking system being unfounded. It's been displayed again. The method being, invent an imaginary strawman of the Fed, which bears no actual likeness to said Fed, then beat up on the made-up Fed. Another salient point which goes unchallenged is the idea of the Fed printing money. They're called Federal Reserve Notes, yes. But they don't just print money. That's actually the duty of the US Bureau of Engraving and Printing. The Fed has a finite amount of money. If the idea was to just inflate and deflate the currency to finance war, you could pay it all off on a one-dollar bill instead of a 10 year treasury bond. Obviously that's ad absurdum. You can't actually do that because the Fed can't actually do that. It's another example of the Fed being subjected to a strawman attack. My opponent claims that Keynes' theories have not been integrated with general economic doctrine. I'm unsure if he's read general economic doctrine. If he has, he'd know that demand-side is the cherry-cake of economic doctrine. The yang of supply-side's yin. Economists Bruce Bartlett, an economic aid to Ronald Reagan has since renounced Supply-side economics in favor of a Keynesian view. It's a polar-switch. The demands of today's market don't rest on the supply end of it, and inflation only effects said supply end. There isn't enough demand in the market to drive the economy. It's the very reason the US automobile industry was in need of TARP funds. Nothing to do with supply, and everything to do with demand. The claim that merely adding money into the economy doesn't bring down unemployment is false, yet again. It's been demonstrated in multiple ways, many of which differ only in who gets that money. The recession Reagan dealt with was solved by returning much of the money collected from taxes to investors, who in turn could pursue entrepreneurial ventures, which created employment. In today's economic environment, that coin needs to be flipped. We have the entrepreneurial ventures, but we don't have the demand to keep said ventures afloat. As for the proposition that government needs to get out of the way to bring the economy back -- no. Government saved business. The free market wrecked the economy, not government. My opponent is so good to cite 19th century busts, but fails to acknowledge the safety nets invented to protect people during those busts. Labor regulations (OSHA, Fair Labor Standards Act) exist specifically to protect the workers from being victimized at the hands of the free market. They were invented specifically because people were being victimized by employers, who took the most profitable road, instead of the safest road to conduct their practices. It created a disregard for workers, in addition to consumers. It's specifically why these regulations exist in the first place. Minimum wage lowers poverty. Inflation occurs regardless of the Fed's intervention, since the Fed only controls the inflation on the side of banks (and that's not to say anything about fractional reserve banking). The minimum wage standard needs to be raised to meet the demands of inflation, not lowered. This is another example of the imaginary Inflation Monster unleashing his wrath. If wages were directly tied into inflation, then the costs of living should be a 1970 levels, since that's when wages began to stagnate, and all of the capital funneled upward. It's a logical fallacy. Not all taxes are harmful, but that's an argument for another day. That being said, I've humored my opponent time and time again on subjects not related to the Federal Reserve (minimum wage, regulations, labor laws, etc.). I ask him, once again, to stay on topic and not create a shotgun blast argument which derails the topic at hand. We're not talking about the minimum wage, sir.