We return to the wisdom of Clemenceau: money is much too serious a matter to be left to the central bankers; meaning of course - the act of putting all at risk by relying on what Milton Friedman called “accidents of personality.”
What John Taylor said so well, most of us who do not live under a rock understand to be true: “The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself – i.e., the Fed determines the interest rate by declaring what it will pay on bank deposits at the Fed without regard for the supply and demand for money. By replacing large decentralized markets with centralized control by a few…officials, the Fed is distorting incentives and interfering with price discovery with unintended consequences throughout the economy.” Amen.
In this blog we have long called for a return to the single goal of price stability (the dual mandate is magnificently redundant) and a requirement that the Fed disclose their rule or strategy for meeting that goal, with regular checkups in front of Congress. Others have provided perhaps even better anchors: see Woodhill from Forbes http://www.forbes.com/sites/louiswoodhill/2014/05/27/we-need-a-boring-monetary-policy/.
And close to home, Stanford’s Hoover Institution recently hosted a conference to discuss recommendations from over a dozen observers for a change to rule-based policy, and legislation that may well be needed to bring these reforms about.
But until that time, we’re stuck with this bunch of planners and their helter-skelter ways.
So, there will be no recovery, at least not of the variety most understand the word to mean. By the simple act of sitting on their hands – our directive of two years ago (and one totally ignored) – the Fed and administration could have claimed a victory of sorts; now they are both guilty as co-conspirators in the tanking of the mightiest economy on the face of the earth and both, if the world was at all a fair place, would now be taking their meals through a slot (along with Paulson, BofA, Citi types and others of that ilk). That little that the US economy has accomplished is in spite of this bunch.
Robert Craven
What John Taylor said so well, most of us who do not live under a rock understand to be true: “The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself – i.e., the Fed determines the interest rate by declaring what it will pay on bank deposits at the Fed without regard for the supply and demand for money. By replacing large decentralized markets with centralized control by a few…officials, the Fed is distorting incentives and interfering with price discovery with unintended consequences throughout the economy.” Amen.
In this blog we have long called for a return to the single goal of price stability (the dual mandate is magnificently redundant) and a requirement that the Fed disclose their rule or strategy for meeting that goal, with regular checkups in front of Congress. Others have provided perhaps even better anchors: see Woodhill from Forbes http://www.forbes.com/sites/louiswoodhill/2014/05/27/we-need-a-boring-monetary-policy/.
And close to home, Stanford’s Hoover Institution recently hosted a conference to discuss recommendations from over a dozen observers for a change to rule-based policy, and legislation that may well be needed to bring these reforms about.
But until that time, we’re stuck with this bunch of planners and their helter-skelter ways.
So, there will be no recovery, at least not of the variety most understand the word to mean. By the simple act of sitting on their hands – our directive of two years ago (and one totally ignored) – the Fed and administration could have claimed a victory of sorts; now they are both guilty as co-conspirators in the tanking of the mightiest economy on the face of the earth and both, if the world was at all a fair place, would now be taking their meals through a slot (along with Paulson, BofA, Citi types and others of that ilk). That little that the US economy has accomplished is in spite of this bunch.
Robert Craven
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