Instead of casting about for a new maestro, we need to return the Fed to dullness and its chairman to obscurity.
It is interesting that there is such a strong folk-macroeconomics belief that the economy will perform well if and only if there is a wise Fed Chairman. My current reading, Big Gods, is about the cultural advantages of religion. One of the advantages that the author overlooks is that people who put their faith in a divine being are less likely to deify humans.
Bhide writes,
Before the crisis the Fed seemingly lost all capacity for the painstaking, boots-on-the-ground supervision of the banks under its purview. And, effective or not, top-down monetary interventions remain attractive to the Fed’s top brass. Running what amounts to a hedge fund on steroids is more glamorous and exciting than managing a regulatory bureaucracy. Perhaps the most important qualification for the next Fed leader is one all too rare in Washington: humility.
During the Great Moderation, macroeconomists took the view that the details of finance do not matter. If the Fed sets the Fed Funds rate properly, it can achieve any macroeconomic objective. Scott Sumner still speaks for that view.
Bhide’s view is the opposite. The details of finance matter a lot, and the Fed’s monetary policy tools are not reliable. I am inclined to agree with Bhide.
You write, My current reading, Big Gods, is about the cultural advantages of religion. One of the advantages that the author overlooks is that people who put their faith in a divine being are less likely to deify humans.
I respond, that soon central banks will no longer credibly issue liabilities, and their home government will be too broke to bail them out, and paper currencies will no longer functon.
Out of soon coming credit and financial crisis, the fiat money system will be replaced by the diktat money system wherewhere diktat serves as trust, medium of exchange, wealth and power.
Liberalism was characterized by full faith and credit in the world central bankers and the Banker Regime for investment gain.
But Revelation 13:3-4, foretells that Authoritaritarianism will characterised by worship of the Beast Regime and its regional statist nannycrats who work in public private partnerships to oversee the factors of production, banking, commerce and trade for regional security, stability, and security.
And Revelation 13:5-18, communicates that Authoritarianism will also be characterized by worship of a New Pharaoh, the Sovereign, and a New Prohpet, the Seignior.
Here’s another idea: break up the agency. It amazes me that the government sees the dangers of monopolies in business (e.g. the American-U.S. Airways merger), but then creates these massive bureaucracies of its own (the CFPB, DHS, etc.)