A former top advisor to Ben Bernanke, and two other “Fed Up” activists
have a plan to revise the Fed by bringing the Fed fully into the government
and adding diversity.
I suggest their plan, shown below, is akin to suggesting one can make
cockroaches behave.
Please consider Former Fed Staffer, Activists Detail Plan to Overhaul Central
Bank.
Dartmouth College’s Andrew Levin, who was a top adviser to former Fed
Chairman Ben Bernanke, Jordan Haedtler of the left-leaning Center for Popular
Democracy’s Fed Up campaign and the Economic Policy Institute’s Valerie
Wilson say in a paper that their proposals amount to an important
modernization of the Fed.
“The Fed’s structure is simply outdated, and that makes it harder for its
decisions to serve the public,” Ms. Wilson said in a press call. “We are well
aware we can’t create a dramatic shake-up” of the Fed, she said, explaining
what she and her colleagues are calling for is “pragmatic and nonpartisan.”
The linchpin of the overhaul is bringing the 12 quasi-private regional Fed
banks fully into government.
Mr. Levin and Fed Up have seen successes in their campaign to overhaul the
central bank. Earlier this year, congressional Democrats and the campaign of
Democratic presidential nominee Hillary Clinton endorsed their push to remove
bankers from the boards overseeing the 12 regional Fed banks. Fed Up’s effort
to promote diversity in a central bank that is still dominated largely by
white males, not withstanding the current leadership of Chairwoman Janet
Yellen, also has gained traction among Democrats.
A People’s Fed
Andrew Levin proposes a “People’s Fed“.
Problem of Control
Levin notes the Fed is unique in that it is a mostly-private enterprise.
Fair enough. But do we really want our model to be similar to the pathetic
performance of the bank of Japan or the EU?
Conflict of Interest
On the surface, that’s clearly a problem but would making the Fed public
change anything?
Please note that ECB President Mario Draghi is an Ex-Goldman Sachs Managing
Director.
This brings us to point number three of Levin’s misguided plan.
No Voice
Diversity for Diversity’s Sake
Diversity for the sake of diversity is pure nonsense. Black, white, red,
or Latino makes no difference at all. The problem is group think, not race.
Every person at the Fed (central banks in general) has been trained in the
same kind of Keynesian and monetarist thinking.
If “Fed Up” really wanted diversity it would seek diversity in thinking,
not diversity in skin color.
Along those lines, one might propose Zero Hedge, Peter Schiff, or me. That
would bring diversity to the group for sure. But that’s not the answer
either.
My Proposal
While pissing and moaning about what is broken, Levin never explained why
we need a Fed at all.
So why we need one?
The Fed, The ECB, the Bank of Japan, the Reserve Bank of Australia, etc.,
all have a proven track record of blowing bubble after bubble.
If we did not have a Fed, it wouldn’t be beholden to Goldman Sachs. And it
would be as diverse as the free market. Nothing is more diverse than that.
Yet, diversity cannot and will not fix that problem because diversity is
not the key problem.
The key problem is the central bank coupled with a Fiat credit system that
can be expanded by central banks at will, in direct response to government
deficit spending.
Not Possible to Overhaul Cockroaches
In essence, Levin proposes we fix the cockroaches. I propose we get rid of
them.
Mike “Mish” Shedlock
