In a recent speech, the Vice Chair for Supervision at the Federal Reserve R.K. Quarles extensively cited F.A. von Hayek. Quarles highlighted Hayek’s argument on freely determined prices as crucial to convey knowledge across operators and enhance a functional economic order. By contrast, he argued, distorted prices harm economic performance. Rather surprisingly, however, Quarles concluded by endorsing another cut of the Fed Funds rates (this line of thinking also applies – mutatis mutandis – to the European context too). Indeed, interest rates are “prices”, and manipulated interest rates are also “biased prices”. So, what should we make of Quarles’ speech?
What’s Wrong With
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