This comes at the most threatening geopolitical moment since 1945, when JPMorgan Chase CEO Jamie Dimon recently warned that interest rates could reach more than 8% within a few years. This gives me hope that what he said was fundamentally wrong. That would cause deficits to explode within 10 years, before the Social Security and Medicare trust funds are depleted.
For too long, the Fed worked hard to create inflation with too cheap money, and then was cool about the supposedly “temporary” nature of inflation. In 2012, the Fed announced an ambitious plan to achieve its goals. desire Just 2% inflation. Even if the evidence shows that the Fed is capable of such precision (the evidence is not), Joseph C. Sternberg’s question in the Wall Street Journal is spot on. ? ”
In a recent report, Dan Katz and Stephen Millan of the Manhattan Institute wrote, “The Fed’s current governance fosters groupthink that has led to serious missteps in monetary policy, while “Gives the Fed flexibility to expand its power unwisely into political areas.” Rationing and banking regulation. ” There is collective thinking here. “Despite the biggest financial mistake of the past 40 years,” Katz and Millan write, none of the nine recently appointed to the board made accurate predictions about the trajectory of inflation. The person is not recorded. Mission Creep: The Fed has moved beyond its traditional technocratic role and “pursued a broader financial and regulatory agenda that is more consistent with a distinctly political system.”
This includes the allocation of credits, which determines winners and losers in the private sector. One month before the 2020 presidential election, we urge Congress to support the Democratic stimulus package (10 times the size of the Republican proposal). Allow racial induction in operations. Incorporating environmental considerations into financial regulation. What the Fed calls “climate-related financial risks” is fictitious. This column previously pointed out that John Cochran of the Hoover Institution was right. There are no measurable climate risks to the “resilience” of the financial system over the foreseeable and controllable period of regulation (of the order of five years).
In July 2019, Federal Reserve Chairman Jerome H. Powell said, “We do not have the authority to lend to state and local governments.” Nine months later, the Fed did just that. Randall K. Quarles, who will retire as the Fed’s vice chairman for oversight in 2020, said that “those with grand plans and less patience for democratic accountability” are asking “why the Fed is so important to the nation’s aging infrastructure.” “Can we fund the repairs?” he said. Funding border wall construction and buying trillions of dollars in green energy bonds. ” Perhaps it can be done. Who will stop it? Congress can’t even budget, but it’s a geyser of opinions on everything. As the agency fails in its primary mission (the Fed’s mission is to preserve currency as a store of value), the agency pursues grandeur through the incrementality of its mission. This is probably also due to the joy of being a place where political trends (today “equity” and climate change) get excited.
Mr. Katz and Mr. Millan recommend shortening the terms of Fed board members and making them removable by the president. The authors intend to balance this strengthening of democratic control by nationalizing the Reserve Bank, which is privately owned by a consortium of local banks. Katz and Millan argue, somewhat puzzlingly, that holding the Reserve Bank’s government arm politically accountable serves as a counterweight to a board whose members are somehow removed by the president. It says that it will be.
With mounting evidence that politics matters, it is counterintuitive to argue for more direct political control of the Fed.It is the greatest threat to American democracy teeth American democracy. The fiscal incontinence that is pushing the nation toward a completely predictable crisis reflects the preferences of the majority of the population. In other words, the idea is to force future taxpayers who do not consent (because they were not born) to pay for a significant portion of the consumption of government services, although the debt is taxed, including inflation, and is deferred. Institutional tinkering with the Fed is no substitute for mature politics.
On recreational toboggan rides, the exhilaration of man-made danger subsides as the sled skids to a halt. Today’s financial collapse will not end so peacefully.
