There are many legitimate reasons to critique the Fed, but the “End the Fed” movement isn’t interested in reform.1. “Ending the Fed” is a Terrible Idea2. The Gold Standard is an Awful Idea3. The Good and Bad of Modest Inflation4. Don’t End the Fed, Make it Accountable to the Needs of the 99 Percent
Read the whole post at AlterNet, Four Things Occupy Wall Street Should Know About the Federal Reserve by Jake Blumgart
A bit of out of paradigm but generally on the right track.
Good link.
ReplyDeleteI've been wondering why the MMT folks have not been more actively engaged in critiquing the big NGDP level targeting craze that appears to be sweeping both the economics blogosphere and some of the policy haunts in recent weeks. There was a very big debate on Scott Sumner's blog a few months ago, with many of the MMTers participating. But I don't recall seeing much since then.
As an MMTer, I don’t have any big objections to NGDP targeting. My main quarrel with Scott Sumner’s version of it is that he relies solely on the Fed to produce the stimulus that get to the target. That strikes me as being a big weakness because the Fed is often said (in my view rightly) to be out of ammunition, or nearly out of ammunition. In other words a bit of fiscal is needed to back up Fed actions here. I said as much on Sumner’s blog a month or two ago. Plus Krugman recently make the same point. For Krugman, see:
ReplyDeletehttp://krugman.blogs.nytimes.com/2011/10/19/getting-nominal/
Plus regulating an economy SOLELY via monetary actions is inherently distortionary. That is, boosting an economy just via interest rate adjustments, for example, works only via entities that are reliant on variable rate loans. You might as well boost an economy by giving money to people with brown hair, but not people with other hair colors.
I think the NGDP is insane and should not happen. The Fed shouldn't even be moving interest rates imho let alone targeting NGDP!!! Sheesh!!! What next....as they going to target how many kids we should all have b/c that effect GDP as well?!?! I mean the slippery slope on this is ridiculous.
ReplyDeleteThe Fed is and should be just a clearing house for balance of payments and reserves and not much else imho.
"Targeting NGDP" shouldn't be anyone's job even the fiscal policy side imho. Fiscal policy should operate with the awareness that they can always "afford" to spend and they cannot go bankrupt. After that point the legislature which consists of our REPRESENTATIVES should only spend fiscally as it supports the people directly. This constitutes various government agencies and offices as well as military, health care, education spending and so on plus tax code and policy, etc. And of course most importantly the government's fiscal policy should be primarily focused on the net savings levels of the private sector and spend accordingly to satisfy spending desires particularly through the various avenues listed above but focusing primarily on tax provisions and certain services all citizens should have access to like a basic jobs program, basic health care, basic education, etc. These are the prime purposes of fiscal policy imho.
the Fed is often said (in my view rightly) to be out of ammunition, or nearly out of ammunition. In other words a bit of fiscal is needed to back up Fed actions here.
I think the Fed is said to be "out of ammunition" b/c monetary policy is not as effective as everyone believes and that leaves the Fed mostly with expectations theory which is also basically a big old dud. Hence fiscal policy is necessary to "back it up" but really it's not backing it up as much as it is replacing it, b/c it's the fiscal expenditure that really is the main driver of the economy. The Fed, aka unelected and unaccountable financiers, have NO AUTHORITY to target NGDP though buying/selling in the market place. That's insane and is an attempt to walk backwards into their mandates, which frankly they have never been able to fulfill based upon the "tools" they were given.
That's my opinion about it anyway. I only see more horrible and terrible class divisions to come from such a "venture."
There was a goo blog post at Multiplier Effect - Levy Scholars to Advise on Fed Reform
ReplyDeleteQuote:
Wray’s recent brief on the Federal Reserve, co-authored with Scott Fullwiler (“It’s Time to Rein in the Fed“), looks at our over-reliance on the Fed (something Wray has discussed elsewhere) combined with a relative lack of transparency and oversight, wading into issues surrounding democratic accountability and the “independence” of the central bank:
.
.
.
.
.
An earlier working paper by Galbraith et al created quite a bit of buzz for its data suggesting the presence of partisan bias in Fed policy during presidential election years (an issue that came up again quite recently), but its main arguments centered around identifying the “real” reaction function of the Fed: namely, that in recent decades the central motivating force behind Fed behavior is a fear of full employment. The paper also reveals that Fed policy plays a significant role in increasing inequality.
here's another take on NGDP...he's against it as well.
ReplyDeletehttp://rogueeconomistrants.blogspot.com/2011/10/ngdp-level-targeting-savings-and.html