Tyler's Case for the Fed (see below) has solidified my judgment that the case for the Fed is surprisingly weak.  I will draw out some of Tyler's comments.

I view 1929-1932 as a better illustration of "a world without a Fed" than "a world with a Fed," even though of course we had a Fed then.

I have learnt that the best response to this kind of reasoning is to say "please pass the nam tok, Tyrone" and move on. Be forewarned.

The Fed made the recent crisis much better than it otherwise would have been.  Without a Fed, we would have experienced something more like the Great Depression, including a frozen payments system.

It's wrong to evaluate a big institution like the Fed by assuming a world in which everything else is exactly the same, except for the Fed's absence. Tyler does a lot of this in his post but I am not enamored of this style of reasoning. This is why we need pre and post-Fed history.  Pre and post-comparisons are one of the few methods we have for understanding how entirely different institutional structures perform in equilibrium (looking at countries without a central bank is another possibility). Pre and post-comparisons have all kinds of problems, since other things are changing, but the facts do at least put some constraints on imagination.

By the way, as the Miron paper I linked to shows, comparing just the 25 years before and after the Fed (even if you exclude GD) also suggests that the Fed reduced stability.

Tyler says the Fed has been getting better. Ok, but that also illustrates the weakness of Tyler's approach. After 100 years we would have expected alternative institutions to have also gotten better.

In the 1950s, 1960s, 1980s, and 1990s, I see the Fed as bringing improvements, of unknown magnitude.

Tyler gives us his informed opinion but it's long on opinion and short on information. Would it be possible to be more vague?  "Improvements"? Compared to what? Compared to the Fed in the 1970s?  Unknown magnitude? As I said, Tyler's case for the Fed leaves me more solidified in my judgment that the case is weak. I will let the Straussians ponder that more.

Historically central banks have been essential in helping nations fight major wars.  The world's preeminent military power simply will have a Fed, for the same reason that it has lots of nuclear weapons.

I agree with this entirely.  Governments want central banks because they help to fuel war. Historically, this is why central banks were created. 

More generally, both Fed and Treasury are usually, in relative terms, voices of economic reason within government, even if they're not everything you wish them to be.  It is arguably counterproductive to lower their status.  Currently, the relevant alternative is a totally politicized Fed, not no Fed at all;

Like the points Tyler makes in the beginning of his post about who does or does not support deposit insurance this is sociology, irrelevant to the fundamental question of evaluation.

Moreover, as I pointed out earlier the case for "independent" central banks is also weak; central banks are always politicized, only the interest groups change.

Alex asks this question.  I am not so enamored of the pre- and post-Fed macroeconomic comparisons.  Presumably the Fed advocate also favors deposit insurance and active exercise of the lender of last resort function.  Furthermore most Fed advocates today do not want a gold standard, in part because it ties the hands of the Fed in a crisis.  I view 1929-1932 as a better illustration of the workings of "a world without a Fed" than "a world with a Fed," even though of course we had a Fed then.  If you take the relevant division to be "before and after WWII," the Fed looks pretty good.

It's also the case that the 19th century had much less interconnected leverage than today's world (not only because of the absence of a Fed) and that agricultural productivity was a much bigger determinant of overall volatility.

I see the historical ledger as follows:

1. The Fed made 1979-1982, and the 1970s in general, much worse than they had to be, and for no good reason.  Count that as a strike against the Fed.

2. The Fed made the recent crisis much better than it otherwise would have been.  Without a Fed, we would have experienced something akin to a Great Depression, including a frozen payments system.

2b. If you wish to give the recent crisis an anti-Fed spin, you can argue that if previous bailouts had not occurred, we might have avoided the high levels of leverage circa 2006 and thus avoided such a major crash.  We would have had one or two big recessions earlier on, however.  More to the point, I believe that Congress would have done earlier bailouts; after all, that is what just happened in Ireland and TARP was Congress in any case.  What is the point of going that route?  People think of the gold standard as fetters on the Fed, but I think of the Fed as an excuse for Congress to step back.  Consult the wisdom of Garett Jones.

3. A "real Fed" would have made 1929-1932 much better than it was.  In my view this #3 more than cancels out #2b.  It is unrealistic to ask for a perfect or even a very good Fed, but it is not unrealistic or utopian to advocate "a Fed better than the 1929 Fed" and indeed we've had that ever since 1937.

4. In the 1950s, 1960s, 1980s, and 1990s, I see the Fed as bringing improvements, of unknown magnitude.

5. Historically central banks have been essential in helping nations fight major wars.  The world's preeminent military power simply will have a Fed, for the same reason that it has lots of nuclear weapons.

6. More generally, both Fed and Treasury are usually, in relative terms, voices of economic reason within government, even if they're not everything you wish them to be.  It is arguably counterproductive to lower their status.  Currently, the relevant alternative is a totally politicized Fed, not no Fed at all; see #5.

Addendum: Bryan Caplan offers relevant comment.