Nothing personal, indeed.. A civil debate can never be a bad thing. What we fundamentally differ on is simple. It's not that I don't get it; it's just that I am an extreme cynic. My view is, simply, that what we have now is at the better end of the spectrum, given the state of the political establishment. I am extremely skeptical that you can change the "GIANT beast", no matter how many audits you perform. Moreover, I believe that the Fed is actually one of the better, least politicized pieces of the machine, which means that, in theory, there's still a possibility that it can produce a future Volcker when the time calls for it. In my extremely cynical view, messing with it can only make things worse and turn the Fed into a proper arm of Congress. The story, told this way, has a very sad end indeed. As to Kahneman and Tversky, of course I know them. I am a very big fan of behavioral finance, so they are my heros, as are people like Terry Odean, Andrei Shleifer and James Montier. My point was that it makes me sad that people keep talking about Taleb. As I keep mentioning, what NNT likes to shout shrilly from rooftops is infinitely less interesting and worthwhile than the work of the people I have mentioned.
Well, I don't see anything to suggest that Greenspan's response to Gramlich in this case was driven by any sinister doctrine. What's more, Greenspan's response reinforces the notion that he was just being a good bureaucrat that stuck to his specific remit. Greenspan's faults are well-known, but I still like that being a political appointee is not one of them. If you're so fond of placing checks, here's my question to you then. Who, or which agency, will be supervising the Fed? Let's just take the main part of their mandate, i.e. monetary policy. Are you suggesting congressional oversight of the Fed's decisions? If not, what other aspects of what the Fed does should be supervised, in your view?
It doesnt surprise me at all that Volcker would oppose auditing this cartel which controls all money - - he was/is part of it. People applaud his actions now. What was he supposed to do back then ? Let inflation rates go from 70s horrible to Weimar levels ? Of course they had to put on the brakes. More importantly, people should ask how the conditions developed that create these boom & bust cycles. The Fed is at the very heart of this, and they know that if people were to see the true extent of their actions . . . well, it would be great for the country, but not too good for Any of the central bankers. It is always a bit amazing to see how little people know about or understand the nature of money & central banking. (I heard an interview of Allan Combs (sp?) where he was asked about auditing the Fed, and he said he really didnt know anything about it. (He later said "whatever . . . yeah, go ahead and audit it.) I guess some just buy the party line from their old Samuelson textbooks from undergrad days and never investigate beyond that. - - -
Whether it's an algorithm or a bunch of humans doesn't matter. Even if it were an algorithm, it will have to be designed and maintained/updated by humans. The economy isn't static and neither is economics. As to my statement, again let me remind you of what I said before. My view of the Fed as being apolitical is my personal opinion, based on my personal experience. If you disagree, pls don't hesitate to offer your own view. Unfortunately, in such a matter, there are no facts, just interpretations and opinions. As to the Fed being opaque, I am not sure what you mean by that. I actually see them as being quite open and communicative. Certainly in matters of monetary policy and its transmission. Which brings me to my question. What specifically do you want the Fed to expose? What exact questions do you want answered? Finally, just to clarify, I am not saying the Fed shouldn't be interfered with because it's done so fantastically well in the past. Far from it. They have made mistakes, no doubt. My point is, simply, that the battle raging now is a fight to replace this flawed, but somewhat independent, institution with something infinitely more harmful, an arm of the US political machine. No matter how bad you believe the Fed is, I fear the politicians are gonna give you something far far worse.
I agree with your last sentence - I have no great faith in politicians. Your phrase "somewhat independent" is a bit uncertain tho - kind of like "somewhat pregnant". If there is influence already, how can we know where the influence is coming from and how strong it is?
The actions of the Federal Reserve to adjust interest rates are frequently mentioned in the news, but I have never fully understood what the Fed is or what else it does. I believe that most Americans also have no idea what the Fed is either. For some reason, it is shrouded in secrecy. The proposal to audit the Fed speaks directly to these hidden actions of the Fed that so profoundly influence our economy. Now that I am starting to research the Fed, I am finding some disturbing things on-line. Realizing my naivete, I do not want to automatically take these things that I am reading as truth. However, since many of you appear to be quite knowledgeable about the inner workings of the Fed, perhaps you could comment on the validity of the ideas present on the internet. Here is a typical website espousing a sinister view of the Fed: http://www.libertyforlife.com/banking/federal_reserve_bank.html
Looking at this site made me laugh... Whose fault is it that Americans don't understand what the Fed does? It's not like it's a secret.
In my view, William Greider's "Secrets of the Temple" is probably one of the best written books on the Federal Reserve. It doesn't have that unnecessary unsubstantiated sensationalism you see elsewhere. The Fed is evil enough without the need to add the crap that website does.
Thanks. I already have that book saved on my Amazon account to purchase with my next order. I have heard from several sources that it is well-written, though very long.