from Steve Forbes at Forbes Magazine,  Reckoning for Biggest Wrecker of U.S. Economy:

Economies aren’t machines that can be calibrated, like automobiles. They are billions of people making decisions numerous times a day. The idea that central planners, whether they’re of the Soviet or Federal Reserve variety, can calibrate economic activity always founders because they can’t predict the future. Central planners assume that past patterns always repeat themselves. (This flaw isn’t confined to big government; more than a few smarty-pants hedge funds have blown up from this misconception.)

As for that seemingly mysterious decline in productivity, there’s no mystery to it at all. Productivity and innovation depend on investment. What the Fed and too many economists don’t grasp is that unstable money hurts productive investment, because businesspeople and investors can’t know what they’ll be paid back with–a 10-cent dollar, a 50-cent dollar, a 120-cent dollar. As a result, capital outlays have been awful for years.

All this points to the basic flaw in how the Fed and most central bankers and economists see money. Contrary to their core belief, money doesn’t control the economy. It reflects activity in the marketplace. Keynes and the monetarists had this exactly backward, but it’s been holy writ among economists and policymakers for decades.

Money simply makes the buying and selling of products and services easier. It has no intrinsic value, any more than a ticket to a concert does or a claim check for a coat at a restaurant. Money is a claim on products and services; it measures value the way a ruler measures space, a clock measures time and a scale measures weight.