… but apparently he’s forgotten them.
The weakness of Douglas Rushkoff’s command of even the most straightforward economic and historical facts rivals the weakness of his command of the economic way of thinking. Judging from what he writes in Throwing Rocks at the Google Bus, he has no firm grip – indeed, he has no grip whatsoever – on facts or economic theory. His ignorance is glaringly displayed, for example, on page 137:
The Federal Reserve’s primary function is to protect the wealthy – those who are holding cash – by preventing the inflation that would make that cash less valuable.
Hilarious!
First, if the Fed’s “primary function” is to prevent inflation, it has failed miserably. As George Selgin, Bill Lastrapes, and my colleague Larry White document in their 2010 paper, “Has the Fed Been a Failure?“, preventing inflation of the dollar is emphatically what the Fed has not done. Over the course of the 124 years from 1790 through 1913 (the year the Fed was created), the dollar lost about eight percent of its purchasing power. In the 103 years since the Fed’s creation – from 1913 through today – the dollar, reckoned by the Consumer Price Index, has lost about 96 percent of its purchasing power.
The CPI, however, does indeed overstate inflation. Looking at the more conservative Personal Consumption Expenditure deflator, the dollar since 1947 has lost about 88 percent of its purchasing power. Debates can and should occur over how to correctly measure inflation, but by even the most conservative measure of inflation, the U.S. Federal Reserve Note has lost a great deal of its purchasing power over time.
All those wealthy plutocrats hoping that the Fed would keep their hoards of cash from losing value should demand a return of their rent-seeking bribes!
Second, note Rushkoff’s identification of “the wealthy” with “those who are holding cash.” Does Rushkoff imagine that Bill Gates or Jeff Bezos or fabulously successful hedge-fund managers in Greenwich, CT, stuff literally billions or hundreds of millions of Federal Reserve Notes into safes or in commercial-bank savings accounts? Does he think that holding most of their fortunes literally in cash is what “the wealthy” do? Judging from the above-quoted passage, apparently Rushkoff does think just that – a reality that alone supplies ample reason to discount any analysis that he offers on economic matters.
