While investors across the globe wait with bated breath to see if Ben Bernanke will suggest that a third round of quantitative easing (QE3) is upcoming at his speech in Jackson Hole, Wyoming on Friday, one long-time market observer has  instead focused his attention on a more far-reaching issue related to the Federal Reserve.

In an interview with Bloomberg, Jim Grant – author of the widely read Grant’s Interest Rate Observer and a long-time critic of the Fed – argued that the U.S. central bank “needs to get out of the central planning business.”

“The Fed was organized in1914 and opened its doors to conduct a more or less traditional central banking business, meaning it would lend against good collateral to solvent institutions in times of cyclical or seasonal need,” Grant noted. “It would defend and protect the gold dollar. That was all that its original remit contained. Fast forward many decades, and we see the Fed in the business of steering, guiding, manipulating the economy, financial markets, the yield curve. It manipulates and pegs interest rates. It is all over the joint doing what failed in the old eastern bloc.”

Grant added that “What we need is a central bank that has the humility not to do what it cannot do. And the Fed cannot do what others have failed to do, namely to plan an economy from a central desk in the capital city.”

On the topic of gold standard – which has been in the news of late due to talk that the Republican party may support it – Grant contended that he would “absolutely” support its return.  “The unintended consequences of massive intervention, and this entails both 0% interest rates and the grotesque enlargement of the Fed’s balance sheet, mostly the risks that the Fed introduces are the risks of the suppression of the basic laws of supply and demand,” he stated. “The reason that the shelves of Wal-Mart are full rather than empty is that freely set prices balance supply and demand in this very complex thing called the economy. That’s what prices do. Prices are discovered in the marketplace…From 100 years before and after the institution of the classical gold standard the price level was the same. 100 years the same.”