Should the Federal Reserve be Independent of political influence?
Pretty straight forward question. Should the federal reserve be independent? I'd like to hear opinions for each side.
Pretty straight forward question. Should the federal reserve be independent? I'd like to hear opinions for each side.
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What do you mean by independent? As in a private for-profit entity? A private non-profit entity? Would the fed's role still be to set monetary policy and regulate financial institutions?
I think he means independent of political influence
Yes, independent of political influence.
Independent of political influence. For example, I believe an independent central bank limits political pressures that could potentially impart an inflationary bias to monetary power.
How would you organize an 'independent' central bank? Who would decide who runs it?
Get rid of the dual mandate. They contradict each other and employment is something the government should be concerned with.
Yes, totally absolutely and 100% the FED should be independent
The Federal Reserve's Mandate is much too large and important to be subject to the petty inconsistencies of democracy and volatility of US politics. Just think of what would have happened to global financial markets during this last election cycle if either candidate had an ounce of influence.
That said, the Federal Reserve's is far too large and important to continue as a co-opted tool of the current leftist insurgents. Mandate creep and lack of intellectual diversity among the Fed Board is a huge issue right now. I mean come on Janet Yellen is a KEYNESIAN LABOR ECONOMIST.
I seem to recall another large, powerful and important, centrally-planned-labor-based economy. What was it called again? The Sophist Confederacy? You know, that one that brought the world to the brink of Armageddon, then collapsed under the failure of its centrally-planned-labor-based economy - leaving millions starving and creating a dangerous power vacuum around the whole world... what were those guys called? It was only like 20 years ago, how could we have forgotten... Oh yeah that's right, Soviet Union!
But seriously, the patient, radical left has totally infected the Fed with their 68% degrees of freedom models that work for 2/3 of the hand-picked historical data - and the Fed is the most powerful institution in the world, by far. And not only are they stupid, they think that they are really smart - which makes them even more dangerous. They think they are so smart that they should just keep adding mandates, until they run EVERYTHING.
Don't believe me about the radical left, and the Fed's mandate creep? Look at Janet Yellen's recent report on income inequality and ask yourself what possible purpose that could serve apart from legitimizing the narrative of a re-distributive state. Moreover, I am willing to bet that the next Fed Chairman is an MMT theorist, who tries to extend Fed power to write the national budget and force federal deficits to prove his model, and subsidize the negative current account. It may be Stephanie Kelton herself. Only problem is when their model proves to be exactly that, just a model, we will be economically crippled and in a hot war with China over defaulting US Debt.
Plus, if you look a the revolving door between the Federal Reserve, Wall Street, and the Treasury Department there is just all kind of ethical issues. Although these though could possibly be addressed with federal regulations in the Gubmit and Wall Street, although there is obviously something to be said for the talent that arises from Wall Street (if not the other two institutions)
All that said, democracy is the underlying cause here, not the solution. If Politicians and Lefties weren't so addicted to cheap money or beholden to their own socialist propaganda of New-Deal type job programs, they would ensure that an important institution like the FED was being responsible, by electing chairmen that would allow the economy to heal through the natural capital reallocation of the business cycle. Instead they collude with the bankers to take the politically popular route, which is the cause of every US bubble, then when the bubble bursts, attempt to "fix" it with the same cheap tricks that caused the bubble in the first place; cheap, unproductive cash that makes the proletariat feel better, even though it is financially ruining them and future generations, while enriching the wealthiest sectors of society.
Unfortunately, "The Will of the People" is to feel good, now; and this is not any better -in effect - than the misguided tinkering of globalist Keynesians. Besides, the common man doesn't know dogshit about central banking. And why should they! Neither do the central bankers (at least not for the last couple decades), only difference is the coal-miner doesn't pretend like he does, and destroy peoples lives and livelihoods. But give him the power to, and he almost certainly will.
TL;DR Gubmit is bad. Fed is bad. We're all totally fucked, and I'm totally pissed.
... "Thus, insolvency and bankruptcy of this government is not possible. It can always pay".
Ok.
O. K.
Is this Tyler Durden from Zerohedge? That's a compliment, btw.
I dont know who either of those are, but I will look them up, and an erstwhile thank you to you.
Yes the Fed should be independent and the dual mandate scrapped.
This being said, the ECB offers an interesting counterpoint. Their sole mandate is with regards to inflation but when eurozone inflation was plugging along in the 10ths of a percent, they didn't feel the need to take action until the political pressure flipped from Merkel to Renzi/Hollande and their (limited) structural reforms. The ECB's actions are heavily influenced by politics and yet its only mandate is inflation. Then again, this might just be the fruit of competing monetary policy cultures (German hawkishness vs southern European dovishness).
Well put. While the mandate of the ECB is lower, I think we fail to see any fast progress on key decisions simply because it has been complicated by having more voices in the forum. The EU is an utter mess because of this misguided sense of democracy, and the perfect example of how bureaucratic control effectively shackles an organization from performing their mandate.
I'm assuming that were the Fed to be independent in the US though, we won't see the same shackles because of a common fiscal philosophy. But oddly, the Dems love harking back to EU style policy, which has provided substantial evidence of its failure to address the problems plaguing it.
Not that I'm convinced that the dual mandate should exist - but I want to play devil's advocate since so many in this thread seem to reject it outright.
Why shouldn't the fed care about employment? Ultimately, the purpose of the Fed is to ensure a stable economy - it was, after all, created to help manage the process of avoiding economic panics/crises and manipulating the business cycle to avoid excesses. In my opinion, the levers of control and the "dual mandate" are semantics in the context of this broader impetus. If you disagree. I'd like to hear what you think Bernanke and Paulson should've done in 08, and why that would've been preferable.
If you accept that economic stability is the goal, I think employment is an important part of economic stability. What is the point of price stability if, say, 30% of the population is destitute, has no money, and therefore doesn't impact prices? Is that a "healthy" economy?
I'd like to make a separate, and admittedly more abstract argument in hopes that we can discuss it. That is - insofar as fractional reserve banking creates economic "losers" by design, is it not important that the fed try to minimize the number of losers in the system? Understood that the causal link between fractional reserve banking and the unemployment rate is difficult to establish, but it stands to reason that when you extend more credit than there are dollars in circulation, you're effectively playing an ongoing game of economic musical chairs with guaranteed losers.
The Fed will always be influenced by the political influence of the globalists and world elites.
You say that as if it's a problem
Never a problem as long as 2a is around!
AUDIT THE FED
Yes, back to Nicholas Biddle days.
It should be largely independent, but the target inflation rate really ought to be 3%, rather than 2% IMO, which is kinda sorta the assumption built into a lot of public pensions.
When pensions are in crisis mode, a little bit of inflation isn't a bad thing.
this thread is irrelevant -- the Fed is ALREADY private. which is fine.
my only quip is the fact they masquerade as a public institution, even using taxpayer money for security, etc. just be transparent about it.
Yes - an independent Fed is the only thing standing b/w us and Zimbabwe
Politicians are broadly idiotic. American politicians are largely a group of lawyers with limited expertise in technical matters. Worse, they are subject to immense pressure from largely no-nothing constituents. Macro-economics is (often) very technical, and too important to entrust to the passions of know-little politicians and their idiot constituents.
Whatever your (probably retarded; working at a bank/ HF does not make you a macro policy savant) opinion about current monetary policy, we're better off having it conducted by government bureacrats that have dedicated their lives to these things and are (somewhat) immune from voter pressure
you're misunderstanding soemthing. the FED is private. NOT run by goverment bureaucrats. while exact ownership is convoluted, the FED is owned by a network of PRIVATE bank(ers).
even the president cannot remove a member of the FED.
The Fed is not private. It does not have enough autonomy to be considered private. It can only take deposits and create liabilities from member banks; it's Governors are appointed by the President; it's governed by the Federal Reserve Act, an Act of Congress; and it is mandated to participate in US Treasuries on a daily basis.
The Fed is a pillar of modern capitalism, unless we end globalization and open trade. But the main issue with Central Banking is that it cannot be more proactive. Ben Bernanke said that he could only go by his instinct to react to the financial crisis in 2008, because at the time there was no model to tell us what we now know--that the economy was breaking under the faulty housing situation. To plan on variables spanning 5 continents is always difficult, so interest rate timing is not well-perceived. Right now, Yellen has the room to take her time on moving rates, but no one knows if she's moving too slow or too fast. Later on, we'll be able to look at the models to determine the course since rates started going up in 2014 to say whether she performed well or not. But, at this point we're all just hoping for the best, which is really how anything ever happens.
I'm sorry; are you joking? Can't be more proactive? These clowns have increased their balance sheet to unimaginable levels.
If you think there is a chance of "normalization", you're kidding yourself.
Well they can't. Even the balance sheet is at its level from mostly instinct. Ben Bernanke didn't even have sufficient information to make the decisions he made. It's an ongoing, highly dynamic situation. So, yes. I'm serious, only an idiot-savant can not understand how complex the Fed's job is.
Any good books or anything ya'll would recommend to better understand the Fed & it's history. Definitely one topic I've been meaning to increase my breadth of understanding in.
Would it make a difference?
I am confused by how harsh some of this Fed criticism is.
Sure, under Greenspan, the Fed failed to anticipate and preemptively address the subprime mortgage crisis. But I feel that the burden also falls on the SEC, Treasury Department, Congress for various legislative items aimed at deregulation, the entire academic community, etc.
But what alternative did the Fed have since the financial crisis? Would we be better off without near-zero interest rates, quantitative easing, and massive injections of liquidity? There is no way.
The fed shouldn't exist, and the market should clear rates.
If you think prices increasing by "close to but not 2%" and that is the definition of stability, you're nuts. They should target deflation.
Go back to Zerohedge, you clown!
Right. Wanting free markets is now synonymous with conspiracy. Genius!
We are approaching $20 Trillion in National Debt. I think a taxing authority should be independent of political authority. Our government needs to be bailed out every 6 months.
How are we going to become debt neutral and actually start paying down our debts?
No President wins an election promising increased taxes.
Here's a little neat trick for those of you who don't understand Economics - that debt never really needs to be paid off/there is not good reason to pay off that debt.
In the long run, we're all dead my friends.
Bump. Can anyone recommend any good books (not textbooks) on the Fed and it's history?
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