Small Victory For ‘Audit The Fed’ Supporters
It’s the news critics of the Federal Reserve have been waiting on today. From Reuters’ Mark Felsenthal this evening:
A U.S. congressional panel on Thursday approved a measure to open the Federal Reserve’s monetary policy decisions to government audits, a surprise blow to the central bank’s efforts to shield its independence and a signal of frustration with the central bank.
The provision, co-sponsored by Republican Representative Ron Paul and Democrat Alan Grayson, would allow a congressional watchdog agency to conduct a broad review of the U.S. central bank’s policy and lending. Fed officials have strongly opposed it, saying it would cast doubt on the central bank’s independence from political pressure.
The House of Representatives Financial Services Committee approved the amendment to broader legislation to revamp financial rules. The panel put off a vote on the broader measure.
House Financial Services Committee Chairman Barney Frank, who opposed the Paul-Grayson measure, predicted it would be revisited when financial reform legislation is debated by the House.
“I think it’s going to be seen as weakening the independence of monetary policy with consequent negative implications,” he told reporters after the vote. “I think people will be worried about the impact on the dollar and on interest rates, and I think that one may be revisited when we get to the floor.”
However, Paul’s measure has earned support from more than half of the members of the House.
The amendment is a further congressional slap at the U.S. central bank after a Senate regulatory overhaul proposed stripping the Fed of its regulatory authority. Some lawmakers fault the Fed for failing to anticipate or prevent the financial crisis that pitched the economy into deep recession, while others are angry at its extensive emergency support for financial institutions…
A Fed representative declined to comment on the vote, and cited earlier comments from senior Fed officials expressing concern that monetary policy audits would undermine the central bank’s independence.
A small victory for “Audit the Fed” supporters, for sure. But the war hasn’t been won, and the Fed is most certainly preparing its next move.
Source:
“House Panel OKs Plan to Open Fed Policy to Audits”
Mark Felsenthal
Reuters, November 19, 2009
November 20th, 2009 at 4:46 am
Are you sure that is consistent with the objective of your blog? You are going to have populist leaders who are only interested in getting re-elected and will push the Fed to be less concerned about inflation! This is a sure recipe for the United States to become a Banana republic!
Under the independent Fed system, the FOMC is motivated by keeping its promise of price stability and growth – this is where its reputation lies. Under the new “audit the Fed” system, the FOMC members will be motivated to pander to the wishes of the elected representatives, which are almost always short-term in nature!
This blog is seriously infected with Libertarianism. May I remind readers that the two countries that Jim Rogers like best, Singapore and China, are hardly anywhere close to Libertarianism in ideology. In fact, strategic directions in their economy are mostly undertaken by their government! Both the education and health-care system in Singapore are run by the government and they are the best in the world (the education system is _the_ best — students learn English and Chinese with a solid grounding in the maths and sciences. Now tell me how many of such talents can you find in Choate Rosemary Hall!). Even their famous Singapore airlines is majority-owned by the government and it is the best in the world.
The United States got into the current mess in no small part due to Libertarianism. Let’s not repeat this bankrupt ideology.
November 20th, 2009 at 6:08 pm
Thanks for the comment Steve.
“Are you sure that is consistent with the objective of your blog?”
What’s not consistent? The topic of the post? The objective of the blog is to warn and educate readers about a coming U.S. financial crash that, I believe, is coming down the pipeline. The material that is dug up and posted about comes from my daily research in cyberspace et al and is somehow related to stated belief. I think it is quite possible the Federal Reserve and their monetary policies not only had a part to play in the ongoing financial crisis but is also setting us up for an economic crash. Therefore, news about legislators who “fault the Fed for failing to anticipate or prevent the financial crisis that pitched the economy into deep recession, while others are angry at its extensive emergency support for financial institutions,” and looking at establishing an audit process is certainly going to make it in this blog.
“You are going to have populist leaders who are only interested in getting re-elected and will push the Fed to be less concerned about inflation!”
Actually, Steve, that is one of my biggest concerns. If the final product gives Congress an avenue to exert too much influence on monetary policy, then we’ve got a problem. Major problem.
“Under the new ‘audit the Fed’ system, the FOMC members will be motivated to pander to the wishes of the elected representatives, which are almost always short-term in nature!”
From what I understand, not only is nothing set in stone yet, but the audit provision can still be eliminated. That’s why I was referring to it as a “small victory” for audit supporters. They might have won the battle, but can still lose the war. We’ll have to see how this unfolds.
“This blog is seriously infected with Libertarianism.”
Steve, what does Libertarianism have to do with any of this? The blog is about a coming financial crash, and the material posted relates to this topic in some form or other. I fail to see how an interest in and concern about this type of event is connected with any particular -ism.
Remember this: just because it’s posted in the blog, doesn’t mean I necessarily agree with what’s written. If it’s related to “crash talk” and something I think readers might want to know about, it’s going in the blog— even if I don’t buy into it. Yes, I have personal views about these things (which are shared occasionally and ought to be clear), but most of the blog’s material comes from excerpts from other works (and referenced as such).
Alas, every once in a while someone tries hammering me for something I didn’t write.
But you’re cool Steve. I’m always glad to hear from you.
“The United States got into the current mess in no small part due to Libertarianism. Let’s not repeat this bankrupt ideology.”
Regrettably, I can’t comment on this. Sounds like I’ll have to look more into this Libertarianism thing…
November 26th, 2009 at 11:51 am
It’s not consistent because your blog flavours responsible monetary policy. Letting populist politicians to run monetary policy is exactly opposite of what responsible monetary policy should be, and hence I am surprised that you seem to be happy with it. Everyone outside the U.S. knows how useless American politicians are, both in the Senate and the Congress. They are way too partisian and cannot get themselves together to solve simple problems. If you let them interfere with monetary policy, I am sure many foreigners, myself included, will pull exposure from USD because U.S. will become a Banana republic. I absolutely have no confidence with the elected politicians in the United States.
“Steve, what does Libertarianism have to do with any of this?”
There’s a little “Stop the Mortgage bailout” icon in the blog. This blog is clearly aligned with the libertarian ideology practised by people like Peter Schiff, who somehow thinks that free markets alone will solve everything under the sun.
There are a lot of things that the state can do to improve the economy. The U.S. have neglected its infrastructure spending. Likewise, the government should generously fund research and development in basic sciences. They are huge endeavours that the private sector cannot really take but will pay off for the economy several times over.
November 28th, 2009 at 9:46 am
Thanks for the comment Steve.
“Letting populist politicians to run monetary policy is exactly opposite of what responsible monetary policy should be, and hence I am surprised that you seem to be happy with it.”
I don’t recall ever indicating I’d be happy “letting populist politicians run monetary policy.” Quite the contrary.
In fact, here’s what I wrote in my reply to your comment from 11/20:
Despite all the jawboning about the Fed and monetary policy being somehow independent from any outside influence, academic studies argue that this isn’t the case. It seems legislators do affect monetary policy. And too much influence in this respect can’t be a good thing.
“I absolutely have no confidence with the elected politicians in the United States.”
A view shared by a growing number of Americans as well, my friend.
“‘Steve, what does Libertarianism have to do with any of this?’”
There’s a little ‘Stop the Mortgage bailout’ icon in the blog. This blog is clearly aligned with the libertarian ideology practised by people like Peter Schiff, who somehow thinks that free markets alone will solve everything under the sun.”
Since you’re associating my having the Stop the Housing/Mortgage bailout icon on Boom2Bust as somehow pushing libertarianism ideology, you might want to explain to the publishers of Energy Independence,
Portland Real Estate Outsider, DC Republican, The Conservative Republican, or any of the others blogs/sites listed on the Stop the Housing/Mortgage Bailout! website that they too are libertarian outlets. All of these are “partners” of the Stop the Housing/Mortgage Bailout! project and were given the opportunity to place the “offending” icon on their blog/site as well.
“…free markets alone will solve everything under the sun.”
Have never bought into this belief. At the same time, I am extremely wary of significant government involvement/intervention in the markets. It goes back to both our views on “populist politicians.”
December 1st, 2009 at 4:12 pm
Yes I agree with you. As you know, I’m not an American. Our views are in many ways influenced by our experiences and backgrounds.
The government in Singapore is quite interventionist. However, they have politicians that are very pragmatic and down to earth. The government heavily subsidies housing for its citizens as well. On a whole, the country is incredibly well managed.
December 3rd, 2009 at 12:41 pm
Thanks for the comment Steve. I hear a lot of good things about Singapore these days. I often wonder if it will someday replace London and New York City as the world’s chief financial center.