Saturday, July 21, 2012

There Is No Technocracy, a.k.a The Fed Is Still Political

. Saturday, July 21, 2012

Not that they've taken any notice at all, but for a long time now I've been yelling at economists who have been disappointed in the Fed's relative complacency that they are not evil or stupid or timid or felons. Rather, they are constrained politically. Pretty highly constrained, in fact. So I was happy -- well, not happy exactly, but satisfied -- to see this story in the NY Times:

House Republicans pressed the Federal Reserve chairman, Ben S. Bernanke, on Wednesday to forswear additional actions to stimulate growth, warning that the results would be counterproductive. ... 
Democrats made no similar effort to convince Mr. Bernanke that he should take additional action. They congratulated the Fed chairman in the manner of people confident that they are speaking with an ally.
The GOP says no more monetary stimulus. The Democrats think the Fed is doing just fine. Their bosses don't want them to do any moreFinancial markets and economic conditions have both stabilized. Is it any wonder the Fed is sitting on its hands? Isn't this exactly what we'd expect if we believed that the Fed was responding to their political incentives?

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There Is No Technocracy, a.k.a The Fed Is Still Political
 
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