A New Tyranny: The Fatal Conceit of Macro-Prudential Policy

Let’s face it, the Federal Reserve is out of ammunition.

By any standard, the world’s most powerful institution is impotent.  So is Congress, who punted immediately to the credentialed technocracy that is the ‘Fed.’

One can see it now, the rush ‘to the exits‘ that characterizes the end of ‘QE & forward guidance.’  For those that have spent a lifetime in a vocation of monetarism, we know just how spent this most honorable institution has become.

Hayek’s ‘fatal conceit’ is still on display throughout both Congress & the Fed.  Both ‘failed’ institutions continue to speak of ‘macro-prudential oversight’.  The thinking underlying this conceit is that the Federal Reserve should be held responsible for political oversight concerning the entire banking, regulatory state.  Its patently absurd.

Macro-prudential policy oversight would presuppose that monetary authorities acting as regulators would possess intimate knowledge of EVERYTHING THAT’S HAPPENING IN FINANCIAL MARKETS!  That they would possess detailed knowledge of every financial relation throughout the entire nation and how they relate to each other is utopian.  Even the thought of any centralized institution seeking to envelop and fix emerging, developing imbalances ON THIS SCALE, is unrealizable.

That kind of omniscience cannot exist.  Unless you live in an agrarian autocracy or Caliphate.  Even then. . . but you get the idea.

It burns me to think that anyone would seek such authority.  Could we not envision how government institutions insulated from accountability, bloated with politically allocated credit could be responsible for the near meltdown on the entire U.S. financial system in 2008?

Maybe the philosophical underpinnings that animate the political convictions of progressives have affinity with pretensions of those that seek a Caliphate?


About William Holland

Systematic Theologian/International Relations
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