Paul Volcker opposes Fed Audit Bill

[Martinghoul]

Quote from Misthos:

I enjoy your nuanced views of the fed, the congress, and the treasury. But you still don't get it. It's all one giant beast now. From bank lobbyists that buy congressmen, Bankers that rotate in and out of the fed, Fed officials and lobbyists that rotate in and out of the Treasury.... over time, it has all coalesced into one GIANT beast.

The people that changed the regs in the recent past, that silenced and marginalized the whistleblowers in the more recent past, are now covering up their crimes by using the beast's last sanctuary - the FED. They are all the same people with the same interests.

I'm not saying that monetary policy should always be open to politicization - I'm saying that the system needs to be flushed, however painful that may be. The alternative is to allow the same people and secrecy to reign. Their interest is self preservation over the best interest of the country. They naively think that they can have their cake and eat it too. That covering up this crime and managing the crisis for the better of the country are not conflicting goals.

Democracy and a merit based system is under attack. This is serious stuff.

As for Kahnemen and Tversky - yes, their published observations predate Taleb's. But you know what? Who cares. All observations of humanity are derivative of past observers. Or, yes, it is possible to arrive at the same conclusion as someone else had that lived in the past without knowing about that past study. I'm sure someone in Ancient Greece or Babylonia witness the same behavioral economics at play. But you do get a gold star for knowing the names of Kahneman and Tversky. I won't take that away from your argument.

(Nothing personal - I view debate as bloodsport - I sincerely appreciate your views and always look forward to your posts.)

Nothing personal, indeed.. A civil debate can never be a bad thing.

What we fundamentally differ on is simple. It's not that I don't get it; it's just that I am an extreme cynic. My view is, simply, that what we have now is at the better end of the spectrum, given the state of the political establishment. I am extremely skeptical that you can change the "GIANT beast", no matter how many audits you perform. Moreover, I believe that the Fed is actually one of the better, least politicized pieces of the machine, which means that, in theory, there's still a possibility that it can produce a future Volcker when the time calls for it. In my extremely cynical view, messing with it can only make things worse and turn the Fed into a proper arm of Congress. The story, told this way, has a very sad end indeed.

As to Kahneman and Tversky, of course I know them. I am a very big fan of behavioral finance, so they are my heros, as are people like Terry Odean, Andrei Shleifer and James Montier. My point was that it makes me sad that people keep talking about Taleb. As I keep mentioning, what NNT likes to shout shrilly from rooftops is infinitely less interesting and worthwhile than the work of the people I have mentioned.

 

[nitro]

Quote from Misthos:

I enjoy your nuanced views of the fed, the congress, and the treasury. But you still don't get it. It's all one giant beast now. From bank lobbyists that buy congressmen, Bankers that rotate in and out of the fed, Fed officials and lobbyists that rotate in and out of the Treasury.... over time, it has all coalesced into one GIANT beast.

The people that changed the regs in the recent past, that silenced and marginalized the whistleblowers in the more recent past, are now covering up their crimes by using the beast's last sanctuary - the FED. They are all the same people with the same interests.

I'm not saying that monetary policy should always be open to politicization - I'm saying that the system needs to be flushed, however painful that may be. The alternative is to allow the same people and secrecy to reign. Their interest is self preservation over the best interest of the country. They naively think that they can have their cake and eat it too. That covering up this crime and managing the crisis for the better of the country are not conflicting goals.

Democracy and a merit based system is under attack. This is serious stuff.

...

Yeah, what he said.

 

[Martinghoul]

Quote from MarketMasher:

I would agree that perhaps the general public was not disagreeing with Greenspan, but the general public is usually occupied with day-to-day living and monetary policy is not their daily focus.

Certainly those profiting at the time had no motivation to oppose him.

But that No One opposed him is not correct.

http://online.wsj.com/article/SB118134111823129555.html?mod=todays_us_money_and_investing

"Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.

"I would have liked the Fed to be a leader" in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board."

The Fed was "captured" by a cult of personality (Greenspan's) - so much so that Gramlich felt he had to discuss it personally rather than openly. This is too much power in one man - a demagogue - and you can't control when another appears except to place checks on the position that (might) prevent it from happening.

Well, I don't see anything to suggest that Greenspan's response to Gramlich in this case was driven by any sinister doctrine. What's more, Greenspan's response reinforces the notion that he was just being a good bureaucrat that stuck to his specific remit.

Greenspan's faults are well-known, but I still like that being a political appointee is not one of them.

If you're so fond of placing checks, here's my question to you then. Who, or which agency, will be supervising the Fed? Let's just take the main part of their mandate, i.e. monetary policy. Are you suggesting congressional oversight of the Fed's decisions? If not, what other aspects of what the Fed does should be supervised, in your view?

 

[Tigerjaw]

It doesnt surprise me at all that Volcker would oppose auditing this cartel which controls all money - - he was/is part of it.
People applaud his actions now. What was he supposed to do back then ? Let inflation rates go from 70s horrible to Weimar levels ? Of course they had to put on the brakes.
More importantly, people should ask how the conditions developed that create these boom & bust cycles. The Fed is at the very heart of this, and they know that if people were to see the true extent of their actions . . . well, it would be great for the country, but not too good for Any of the central bankers.

It is always a bit amazing to see how little people know about or understand the nature of money & central banking. (I heard an interview of Allan Combs (sp?) where he was asked about auditing the Fed, and he said he really didnt know anything about it. (He later said "whatever . . . yeah, go ahead and audit it.) I guess some just buy the party line from their old Samuelson textbooks from undergrad days and never investigate beyond that. - - -

 

[Martinghoul]

Quote from WaveStrider:

Why not an algorithm that grows the money supply based on parameters like population growth? Why is human intervention even needed?

Also, you again state the Fed is apolitical. That is starting from a conclusion. There is no supportive evidence for this because the Fed is opaque. Also, not all special interests are strictly/solely political.

The belief that being apolitical is a good unto itself is a virtue. I agree. But that is non sequitur to whether the Fed should be left alone based on it's past performance. To argue that the Fed should not looked into is to say that the outcomes/results from what the Fed has done is the past are good, and therefore deserve a laissez faire Fed approach.

The results the Fed has historically produced, I think, is actually a separate argument than whether they are in-fact, not influenced by special interests.

Whether it's an algorithm or a bunch of humans doesn't matter. Even if it were an algorithm, it will have to be designed and maintained/updated by humans. The economy isn't static and neither is economics.

As to my statement, again let me remind you of what I said before. My view of the Fed as being apolitical is my personal opinion, based on my personal experience. If you disagree, pls don't hesitate to offer your own view. Unfortunately, in such a matter, there are no facts, just interpretations and opinions. As to the Fed being opaque, I am not sure what you mean by that. I actually see them as being quite open and communicative. Certainly in matters of monetary policy and its transmission.

Which brings me to my question. What specifically do you want the Fed to expose? What exact questions do you want answered?

Finally, just to clarify, I am not saying the Fed shouldn't be interfered with because it's done so fantastically well in the past. Far from it. They have made mistakes, no doubt. My point is, simply, that the battle raging now is a fight to replace this flawed, but somewhat independent, institution with something infinitely more harmful, an arm of the US political machine. No matter how bad you believe the Fed is, I fear the politicians are gonna give you something far far worse.

 

[WaveStrider]

Quote from Martinghoul:

...is a fight to replace this flawed, but somewhat independent, institution with something infinitely more harmful, an arm of the US political machine. No matter how bad you believe the Fed is, I fear the politicians are gonna give you something far far worse.

I agree with your last sentence - I have no great faith in politicians.

Your phrase "somewhat independent" is a bit uncertain tho - kind of like "somewhat pregnant". If there is influence already, how can we know where the influence is coming from and how strong it is?

 

[DrPepper]

The actions of the Federal Reserve to adjust interest rates are frequently mentioned in the news, but I have never fully understood what the Fed is or what else it does. I believe that most Americans also have no idea what the Fed is either. For some reason, it is shrouded in secrecy. The proposal to audit the Fed speaks directly to these hidden actions of the Fed that so profoundly influence our economy. Now that I am starting to research the Fed, I am finding some disturbing things on-line. Realizing my naivete, I do not want to automatically take these things that I am reading as truth. However, since many of you appear to be quite knowledgeable about the inner workings of the Fed, perhaps you could comment on the validity of the ideas present on the internet. Here is a typical website espousing a sinister view of the Fed:

http://www.libertyforlife.com/banking/federal_reserve_bank.html

 

[Martinghoul]

Quote from DrPepper:

The actions of the Federal Reserve to adjust interest rates are frequently mentioned in the news, but I have never fully understood what the Fed is or what else it does. I believe that most Americans also have no idea what the Fed is either. For some reason, it is shrouded in secrecy. The proposal to audit the Fed speaks directly to these hidden actions of the Fed that so profoundly influence our economy. Now that I am starting to research the Fed, I am finding some disturbing things on-line. Realizing my naivete, I do not want to automatically take these things that I am reading as truth. However, since many of you appear to be quite knowledgeable about the inner workings of the Fed, perhaps you could comment on the validity of the ideas present on the internet. Here is a typical website espousing a sinister view of the Fed:

http://www.libertyforlife.com/banking/federal_reserve_bank.html

Looking at this site made me laugh...

Whose fault is it that Americans don't understand what the Fed does? It's not like it's a secret.

 

[Misthos]

Quote from DrPepper:

The actions of the Federal Reserve to adjust interest rates are frequently mentioned in the news, but I have never fully understood what the Fed is or what else it does. I believe that most Americans also have no idea what the Fed is either. For some reason, it is shrouded in secrecy. The proposal to audit the Fed speaks directly to these hidden actions of the Fed that so profoundly influence our economy. Now that I am starting to research the Fed, I am finding some disturbing things on-line. Realizing my naivete, I do not want to automatically take these things that I am reading as truth. However, since many of you appear to be quite knowledgeable about the inner workings of the Fed, perhaps you could comment on the validity of the ideas present on the internet. Here is a typical website espousing a sinister view of the Fed:

http://www.libertyforlife.com/banking/federal_reserve_bank.html

In my view, William Greider's "Secrets of the Temple" is probably one of the best written books on the Federal Reserve. It doesn't have that unnecessary unsubstantiated sensationalism you see elsewhere.

The Fed is evil enough without the need to add the crap that website does.

 

[DrPepper]

Quote from Misthos:

In my view, William Greider's "Secrets of the Temple" is probably one of the best written books on the Federal Reserve. It doesn't have that unnecessary unsubstantiated sensationalism you see elsewhere.

The Fed is evil enough without the need to add the crap that website does.

Thanks. I already have that book saved on my Amazon account to purchase with my next order. I have heard from several sources that it is well-written, though very long.