The real questions US Senate should have asked FOMC Chair Janet Yellen..

Brendan Brown of Mises Institute has a nice piece.

He calls the recent meeting a missed opportunity to grill Fed chair and hold the central bank of the mega mess:

In terms of theatrical impact, the first performance of the Republican majority in the Senate responding to semi-annual testimony from Fed Chair Yellen was a dud. That is bad news for US monetary reform. The root cause of the theatrical failure is that a winning strategy for monetary revolution has failed to emerge from the Republican ranks. Instead we hear the old tired messages about “auditing the Fed,” “changing the structure of the FOMC,” and adopting a neo-Keynesian rate-fixing “rule.”

Regrettably, the Senate Republicans and indeed their colleagues in the House are coalescing around an empty audit devoid of ideology and principle. One thinks of the judges in Kafka’s The Trial who scribble inanities on blank pieces of paper. Chair Yellen has won the visual theater by dumping books of the latest Fed regular audit on the table in front of her Republican critics and saying implicitly “you want more of this?” The public does not like accountants!

There was no Senator Bunning moment. Jim Bunning, the Kentucky senator who in voting against the nomination of Professor Ben Bernanke as Fed Chair in December 2009 told him “you are the definition of moral hazard. From monetary policy to regulation, consumer protection, transparency, and independence, your time as Fed Chairman has been a failure.” The new Senate Banking Committee Chair, Richard Shelby, and his Republican colleagues had several chances to make top theater, but they bungled it.

These opportunities included Yellen’s reply to Senator Shelby opposing an overhaul of the FOMC structure “I think the present structure works well, so I wouldn’t recommend changes.” The chair or a fellow senator could have answered:

You have the effrontery, Madam Chair, to tell us that the structure works well. That is despite the Fed having engaged in recent years in a vast monetary experiment which has failed in its central purpose of providing a strong economic expansion — in fact this has been the weakest economic expansion ever following great recession in US history — whilst spreading a dangerous asset price inflation disease throughout the global economy whose deadly end phase US citizens now dread.

Further:

You, Madam Chair, are no Paul Volcker. Throughout your twenty-year career as a top monetary bureaucrat you have never voted against any single policy decision. The policies you helped design and approve were responsible for grave Fed-made monetary instability of which the symptoms have been a sequence of speculative booms and busts. These have sapped economic prosperity and freedom.

In the FOMC meeting of July 1996 you were the lead advocate of replacing the aim of stable prices in the long-run with a perpetual 2 percent inflation target. The adoption of that 2 percent inflation target in a period of rapid productivity growth as was occurring then in the midst of the IT revolution produced tremendous asset price inflation ending in crash and recession. You and your fellow-governors at the Federal Reserve conspired to keep that decision secret until it eventually came out in transcripts published many years later. That is why we need to let the sunshine in through greater transparency and oversight.

Madame Chair, you repeatedly express sympathy for the victims of the weak labor market. But have you ever regretted your role in their misery via having advocated and pursued a policy of perpetual so-called low inflation which has resulted in huge asset price inflation. You talk about the need to avoid deflation. Does this mean you are denying monetary history?

Prior to Fed-made perpetual inflation, prices of goods and services on average fluctuated both downward and upward. Indeed it was the fall of prices to a low level in the business recession coupled with expectations of recovery in the subsequent expansion which caused businesses and households to bring forward spending. The invisible hand thereby accomplished what all your dangerous monetary experimentation has failed to achieve.

You at the Fed have done everything possible to sustain 2 percent inflation following the last Great Recession in defiance of natural rhythm. The result has been the spreading of a powerful global asset price inflation virus featuring bubbles some of which have already burst — including oil and other commodities. Greater busts are likely to follow and we Republicans and ultimately US citizens will hold you responsible. We put you on warning now.

They have been all victims of the so called mainstream economic thinking.

But then atleast in US Senate has an option and can take the Fed chair for a ride. In other countries, the central bankers are accountable only till they are appointed. After that, they are meant to be independent and unaccountable..

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2 Responses to “The real questions US Senate should have asked FOMC Chair Janet Yellen..”

  1. Eric Gonchar Says:

    Eric Gonchar

    The real questions US Senate should have asked FOMC Chair Janet Yellen.. | Mostly Economics

  2. Freddom Mentor reviews Says:

    Freddom Mentor reviews

    The real questions US Senate should have asked FOMC Chair Janet Yellen.. | Mostly Economics

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