Comments on: Central Bank Independence is Overrated

By: q

Sat, 18 Jul 2009 00:28:46 +0000

at least with respect to AIG, he hasn’t said anything that would lead me to believe that he didn’t favor the bailout. yes, he feels badly about it, and yes i think he held his nose, but i think he did it on principle.

i think the principle was that he wanted to avoid a debt-deflationary depression.

i doubt though that we would get a direct statement like ‘i argued against it but did it anyway’ even if it was so.

By: David Merkel

David Merkel — Fri, 17 Jul 2009 04:20:34 +0000

q — with respect to liquidity programs, I agree, but with respect to Bear, the GSEs and AIG, I don’t. Bernanke’s hand was forced in those situations, and even he has admitted a dislike for those actions in later interviews.

Lord — I believe the “double mandate” helps drive systemic risk levels higher, as policy accomodation get applied earlier, bigger and longer than it should. Ultimately unemployment levels are not affected by monetary policy in the long-run — those are more a factor of regulatory policies that would affect the hypothetical “full employment” level.

Who am I to speak? Nobody but a voter, and an economist that predicted this crisis, unlike most, even though I was wrong about the size — it is bigger than I projected at first, and smaller than what I currently project.

By: q

Fri, 17 Jul 2009 00:25:32 +0000

you sure that bernanke has been caving to political pressure? i think he believes in what he is doing, as what he is doing is completely consistent with what his academic work pre-Fed.

By: Lord

Lord — Thu, 16 Jul 2009 23:15:38 +0000

Sound currency is not the only duty of the Fed. Congress also dispatched to it the duty of maintaining a strong economy and employment. Who are you to tell congress how to do its job? Who are you to presume the Feds actions don’t represent independence? I understand your argument about accountability and independence but in the end they are accountable to congress and the request for independence is at most a plea not to interfere in what they have judged to be mostly correct actions. Others would have it abolished. Congress can judge what it wants to do.

By: matt

matt — Thu, 16 Jul 2009 21:44:09 +0000

Independence is overstated. When you have someone like Jamie Dimon sitting on the board of directors for the New York Fed at a time when, “Sure, JPMorgan would love to take over Bear Stearns… if the New York Fed agrees to foot the first 30 billion in losses.” Yeah, really independent.

And that is not to mention that the Federal Reserve is, by its charter, not independent from the banks. There’s no better deal than being able to borrow at about 0% and turn the money around into low risk assets.