Hardly a Balkanized Federal Reserve

Let’s get power relations straight.  The Federal Reserve is a powerful, even a transnational power.  It is arguably the single most powerful institution on the planet.  It TOO can be defeated, weakened, and brought down.  The impact of weak purchasing power is well known, remember Weimar, Japan, Russia, Germany, Mexico, the list is nearly endless.  Every great political power that ever existed has had to deal with potentially life-threatening policy adjustments to keep parity.

But let’s remember that realpolitik is synonymous with relativism, and those at the helm of the Federal Reserve quietly know that they’re a creature of Congress!  They either play along or get played.  You’re either at the table, or your ON the table.  The Fed knows this and has historically dealt well with this arrangement.  I cannot say the same for the last ten years. The hit job(s) that are lining up to size-up the Fed will shake D.C.  I have no other way to say it but bluntly.

F.R.A.T. = Federal Reserve Accountability & Transparency Act has threatened to hamstring the hyper-expansionary, accommodative policies that characterizes EVERY failed Federal Reserve Chairman EVER!!  The adoption of the Taylor rule is simple:  it means that any expansionary policy to accommodate demand must watch two independent variables simultaneously, namely the output gap & inflation.  This is hardly a threat to balkanize the Fed.

AUDIT the FED is the second threat.  It has nearly nothing to do with accounting but instead asks that Fed managers expose their political philosophy in their attempt to accommodate excessive demand.  This would be done via the Government Accountability Office (GAO).  What Congress asks is that the voting members of the Federal Reserve provide transparency regarding monetary policy decisions.

How else to say it:  a truly independent Fed would welcome any policy attempt to strengthen its credibility.

About William Holland

Systematic Theologian/International Relations
This entry was posted in Economics, Federal Reserve, Macro-economics and tagged , . Bookmark the permalink.

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