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Jon Schweppe praises John Tamny’s new book “Who Needs the Fed?”


By Jon Schweppe

Excerpt from Townhall:

Who Needs the Fed? is an incredible read, even if you don’t have much of a knowledge base about economics. Tamny uses pop culture and the world of sports to describe complicated concepts and make them easy to understand. Some of these topics — I mean seriously, we’re talking about monetary policy here — have no business being exciting. And yet Tamny manages to bring them to life in a way that makes his 202 page book positively engrossing.

Credit is the central concept of Tamny’s book. “Credit,” Tamny writes repeatedly, “is not money.” Instead, it is “always and everywhere the actual resources — tractors, cars, computers, buildings, labor, and individual credibility — created in the real economy.”

To illustrate the meaning and value of credit, and why it exists as an independent phenomenon unaffected by central planners at the Federal Reserve, Tamny uses more than a dozen real-world examples. He cites technology firms like Uber, Amazon and NetJets. He tells fascinating stories about investors like John Paulson and venture capitalists like Peter Thiel. He employs a clever sports analogy about former Michigan football coach Brady Hoke and eventual replacement Jim Harbaugh. He explains the differences between investment in Silicon Valley and investment in Hollywood, referencing the careers of Spike Lee, Robert Downing, Jr., and Warren Beatty.

And he writes about Taylor Swift. A lot. Because she is awesome.

In a brilliant example demonstrating the real-world value of credit, Tamny constructs a hypothetical where Taylor Swift, who took home $80 million in 2015 according to Forbes, gave away all of her worldly possessions and depleted all of her bank accounts. Tamny explains that, even without a nickel to her name, Taylor Swift could instantly receive million-dollar investments from top venture capitalists. Why? Because she has all the credit in the world. She can sellout stadiums, produce albums that sell more than 3 million copies, and get on any television show she wants at any time. The market knows she is a sure thing, and venture capitalists would do almost anything to invest with her.

In stark contrast to that, if I, Jon Schweppe, went to a venture capitalist — let’s say Shark Tank’s Mark Cuban — and asked for a million dollar investment for my upcoming hit album, “Songs About The Silver Line”, I would be mercilessly mocked. Taylor Swift, a born and raised American superstar, has far better credit than I do, even if I imagine otherwise after a couple drinks at the karaoke bar.

Taylor Swift might even have better credit than the Federal Reserve. Tamny uses this example, along with dozens of others, to demonstrate that the Federal Reserve’s attempts to decree credit “easy” or “tight” are ultimately feckless. Tamny argues that the free market, not the federal funds rate, determines who is deserving of credit and who is not based on an individual’s credibility.

But as I explained earlier, Who Needs the Fed? goes beyond the Federal Reserve. It could easily have been titled, Who Needs the Federal Government? Government, Tamny argues, destroys credit. Taxes are stolen from productive parts of the economy and given to the monstrous federal government, where credit goes to die.

Read more at Townhall

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