The Independence of the Fed

by: DaveJ

Wed Nov 25, 2009 at 19:30


Reps. Ron Paul and Alan Grayson are trying to get the Federal Reserve audited.  Last week the House Financial Services Committee passed an amendment to their financial regulatory reform bill that would mandate an audit.

The Audit the Fed Coalition is trying to get HR 1207 and S 604 enacted.

Opponents say that an audit threatens the Fed's "independence."

So ... Have any of you heard the name Stephen Friedman, former Chair of Goldman Sachs?  While still on the Board of Goldman Sachs he was Chairman of the Federal Reserve Bank of New York.  Now there's some independence for you!  (Never mind the stuff about buying GS stock after the Fed became their regulator in late 2008, etc.)

I'm just sayin'... one person's "independence" is another person's ... something else.  The Fed is not independent of the giants of the financial sector.  Of course we want independence so they set interest rates based on sound policy and independent of political considerations.  So when do they start doing that?
DaveJ :: The Independence of the Fed

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The Independence of the Fed | 8 comments
Why did the government surrender... (0.00 / 0)
it's constitutional power to create money to private bankers in the first place? And then loan it back at interest? Seems like a corrupt scam to me. The real solution is to un-privatize the Fed and put control of the money supply back under democratic control.

miasmo.com
What about other countries? (0.00 / 0)
Do they also privatize their money creation? How about China? Japan? European countries? Does anyone happen to know?

miasmo.com
[ Parent ]
Not here in Germany! Bundesbank is somewhat independent, though. (4.00 / 1)
It's a public institution whose board members are chosen by the government and the Bundesrat, the German equivalent of the Senate. This shall ensure that the government doesn't have a direct command of the bank, and can't influence its expert decisions. Of course, this is a result of the hyperinflation of the 20s, when the governement simply ordered the bank to print more money. And that's why one of the central tasks of the Bundesbank is to prevent inflation. Today, is has to do this in accord with the other European Central banks, of course.

Different from the US, most board memebers are academical pundits, not commercial bank insiders. If this results in a better policy, I don't know.  

[ Parent ]
The history (0.00 / 0)
The history of money supply under democratic control is not so good.  That is why "independence of the Fed" is important.  But transparency is not a barrier to independence.  We have a right to know what they are doing, if they are corrupt, buying or selling influence, etc.

--

Seeing The Forest -- Who is our economy FOR, anyway? Twitter: dcjohnson
[ Parent ]
Guess I don't know enough history. (0.00 / 0)
But the idea that our money supply should be in the hands of a small group of wealthy elite bankers seems like the very definition of conservatism to me. "We peasants can't be trusted with such matters. We need a ruling class to protect us from ourselves."

miasmo.com
[ Parent ]
Not my point (4.00 / 1)
Well my point was that the Fed really is not independent now, not that it is good that the large financial corporations are in charge of it.

The old saying that the Fed's job is to "take the punch bowl away when the party gets going" explains why independence - real independence - is a good thing.  Similar to how the Republicans were able to persuade voters that tax cuts are good -- and now we have massive deficits and debt...

By the way, the story at HuffPo on how the Fed controls what gets printed in journals, and therefore academic careers, is very important to read.  http://www.huffingtonpost.com/...  If the Fed is under the influence of an ideology or anything else, and the Fed is the gatekeeper over who is an economist...

--

Seeing The Forest -- Who is our economy FOR, anyway? Twitter: dcjohnson

[ Parent ]
"one person's "independence" is another person's" income? (0.00 / 0)
Well, sounds about right, doesn't it?
:-/
Good policy, good politics (0.00 / 0)
The progressives amongst the Progressive reach out to the libertarians. In time, it will become the norm.

The Independence of the Fed | 8 comments
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