Congressman Kevin Brady, Republican from Texas, is calling for a Centennial Monetary Commission to review the performance of the Federal Reserve over the last Century. Steve Horwitz recently wrote an op-ed at U.S. News endorsing the idea.
I agree.
In my view, the Great Depression was strike one. The Great Inflation was strike two. The Great Recession was strike three.
I think it is time for fundamental change. I don't think the Federal Reserve has mostly done a good job. I have no interest in protecting the Fed.
On the other hand, I am not at all sympathetic to returning to the monetary regime (and banking system) the U.S. had developed circa 1913.
And there is little doubt that a Centennial Monetary Commission could make recommendations, that if acted upon, would result in a much worse system.
But the monetary regime in the U.S. is broken. I am willing to take some chances to see it fixed.
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Well, before even free markets, I believe in democracy. Sure, within a constitution, and a bill of rights. Property rights too.
ReplyDeleteSo I believe in clarity, transparency and accountability in government, and that includes the Fed, if we are to have a government central bank.
So, if we accept the premise of a central bank---and I understand some don't---then I say have it be clear and above-board who runs it and what they are doing.
I propose a Fed Chairman and no FOMC, and that chairman serves at the pleasure of the US President.
If I don't like monetary policy, or its perceived results, I have a vote.
Right now, does anyone know who are the FOMC members without looking at Wikipedia? Revolving seats and a permanent NY seat--and how are these people selected? And the Fed Chairman's term is not coterminous with the President's, meaning a President's will can easily be flummoxed by an unelected Chairman, appointed during a previous administration. That is like having a ship's captain, but somebody else is on the rudder and maybe someone else in the engine room.
Would voter's be "responsible?"regarding monetary issues? Are we, when we vote on defense, environmental, or medical issues? I would say nuclear war is even more devastating than bad monetary policy, but we do not leave the decision to go to war in the hands of expert panels.
I think if the Fed chairman knew he would be canned, we would never see the recent fixation on minute inflation at the expense of recovery.
And when inflation got too high, voters would probably send a signal on that. When is inflation too high? Who knows? The voters know what they think. Some people argue for 2 percent, others for zero, and not so long ago (the 1980s) getting inflation down to 4-5 percent was considered adequate.
Democracy is a terrible form of government---until you try any other form of government.
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