Skip to content


Bob Murphy on Fed “Independence”

Bob Murphy on Fed Independence

By Campaign For Liberty
http://www.campaignforliberty.org/bob-murphy-fed-independence

Writing in the Fiscal Times, leading Austrian economist Bob Murphy looks at whether the Fed is truly independent from political sway. (Spoiler alert: it isnt.)

Professor Murphy highlights a 1975 study by Yale University professor William Nordhaus that showed the existence of a Fed-created political business cycle :

For most countries that he analyzed, Nordhaus found no smoking gun proving political interference with the central-bank policymaking, but he concluded that it appeared the United States had a very politicized business cycle. Nordhaus looked at 10 before and after election periods covering five U.S. election cycles. For nine of those 10 periods, the unemployment rate matched his models prediction: Joblessness fell before the election and rose afterward. This pattern is exactly what one would expect if elected officials exercised discretion over the timing of the economys booms and busts. If the economic fluctuations were due to random chance, the probability that they would coincide with the observed pattern would be very small, only slightly above 1 percent. Although intuitive, the simple predictions of a political business cycle model didnt perform as well in the two decades following Nordhaus seminal work. One refinement was to assume politicians only lean on the central bank to loosen up before an election if it seemed they would otherwise be likely to lose; an incumbent who was confident of reelection wouldnt take the risk of goosing the economy for short-term gain but having to paying a political price for it during the next term. (For details, see Kenneth Schultzs 1995 article in the British Journal of Political Science.) Fortunately, hyper-refined economic models arent always necessary for showing that political factors influence central bank policy. Indeed, ordinary narrative history can reveal even scandals of the opposite kind: central banks aggressively asserting their political independence at great cost to the economy. Nicholas Biddle was chief of the Second Bank of the United States the Feds predecessor who decided to fight moves by President Andrew Jackson to veto the renewal of the banks charter and withdraw Treasury deposits from the bank. A champion of hard money, Jackson said the central bank was a political tool that served the monied elites at the expense of ordinary people. Biddle, however, had many cards to play during his battle against the populist Democrat. Not only did he have luminaries such as Daniel Webster and newspaper editors literally on his payroll, but he exercised his power to call in bank loans and tighten credit, thereby causing bank failures and a financial panic. This worthy President, Biddle wrote, thinks that because he has scalped Indians and imprisoned judges, he is to have his way with the Bank. He is mistaken. Biddles callous disregard for the economic destruction he wrought shows the naivete in thinking that fallible men (and now women) could be in charge of the nations money machine and not succumb to temptations of power. No one should be deemed above the fray. When Alan Greenspan took the helm at the Federal Reserve in 1987, he had a reputation as a hard-money man opposed to fiat money and government economic intervention. In 1966, he wrote an essay praising the gold standard that Ayn Rand would include in her book on capitalism, but you wouldnt have known this had you only followed Greenspans actions at the Fed. Indeed, the excess creation of fiat money and credit during his tenure inflated the real estate bubble whose bust precipitated the financial crisis in 2008. Less blatantly, Greenspans successor, Ben Bernanke, veered from the monetary strategy he outlined in his earlier academic work, leaving many economists puzzled as to why Bernanke as Fed chair seemed more interested in bailing out banks than in helping unemployed workers. The above stories notwithstanding, the root problem with the Federal Reserve isnt one of especially weak leadership caving to political pressure. Rather, the entire premise of Fed independence is absurd: The central bank cannot help but be political. It was created by an act of Congress in 1913. Under its current structure, the seven members of the Feds Board of Governors (from whom the chair is also selected) are nominated by the president of the United States and confirmed by the Senate. If the president and Senate were to pick the Board of Directors and CEO of Exxon and this group then had regular meetings to announce its targets for the price of crude oil nobody in the financial press would dream of calling Exxons decisions independent of politics. It would clearly be a state-run company, utterly subservient to Washington. Trump committed a faux pas with his public complaints about the Fed. But his actual mistake was in letting the American people in on a dirty secret: The central bank is by its very nature a political institution that exists to serve the nations rich and powerful class, not the average Joe. So by all means, lets champion Fed independence from political interference, and start by taking away its government-granted power to create legal tender. If the Fed were a private bank like any other, we could be sure the president would no longer micromanage its policies.

Read the whole article here. And help Campaign for Liberty expose the political influences behind Fed decision making by signing the petition to Senator Mitch McConnell asking him to schedule a vote on Audit the Fed. Sign here.

View the original article at http://www.campaignforliberty.org/bob-murphy-fed-independence.

Related Posts with Thumbnails

Posted in Analysis & Review, Business, Finance & Economics, Politics.

Tagged with , , , , , , , , , , , .


0 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.



Some HTML is OK

or, reply to this post via trackback.

Support #altnews & keep Dark Politricks alive

Remember I told you over 5 years ago that they would be trying to shut down sites and YouTube channels that are not promoting the "Official" view. Well it's all happening now big time. Peoples Channels get no money from YouTube any more and Google is being fishy with their AdSense giving money for some clicks but not others. The time is here, it's not "Obama's Internet Cut Off Switch" it's "Trumps Sell Everyones Internet Dirty Laundry Garage Sale". This site must be on some list at GCHQ/NSA as my AdSense revenue which I rely on has gone down by a third. Either people are not helping out by visiting sponsors sanymore or I am being blackballed like many YouTube sites.

It's not just Google/YouTube defunding altenative chanels (mine was shut), but Facebook is also removing content, shutting pages, profiles and groups and removing funds from #altnews that way as well. I was recently kicked off FB and had a page "unpublished" with no reason given. If you don't know already all Facebooks Private Messages and Secret Groups are still analysed and checked for words related to drugs, sex, war etc against their own TOS. Personally I know there are undercover Irish police moving from group to group cloning peoples accounts and getting people booted. Worse than that I know some people in prison now for the content they had on their "secret private group". Use Telegrams secret chat mode to chat on, or if you prefer Wickr. If you really need to, buy a dumb phone with nothing for the NSA/GCHQ to hack into. Ensure it has no GPS tracking on it and that the battery can be removed. These are usually built for old people to get used to technology storing only a set of numbers to call. However they have no games, applications to install or other ways people can exploit the computer tracking device you carry round with you most of the day - your smart phone. If you are paranoid ensure that you can remove the battery when travelling around and do so to prevent GPS tracking or phone mast triangulation. Even with your phone in Flight mode or turned off, it can be turned on remotely and any features like front or back cameras, microphones and keylogging software can be installed to trace you.

So if your not supporting this site already which brings you news from the Left to the Right (really the same war mongering rubbish) then I could REALLY do with some..

Even if it's just £5 or tick the monthly subscription box and throw a few pound my way each month, it will be much appreciated. Read on to find out why.

Why?

Any support to keep this site would be appreciated. You could set up a monthly subscription for £2 like some people do or you could pay a one off donation as a gift.
I am not asking you to pay me for other people's articles, this is a clearing house as well as place to put my own views out into the world. I am asking for help to write more articles like my recent false flag gas attack to get WWIII started in Syria, and Trump away from Putin. Hopefully a few missiles won't mean a WikiLeaks release of that infamous video Trump apparently made in a Russian bedroom with Prostitutes. Also please note that this article was written just an hour after the papers came out, and I always come back and update them.

If you want to read JUST my own articles then use the top menu I have written hundreds of articles for this site and I host numerous amounts of material that has seen me the victim of hacks, DOS plus I have been kicked off multiple hosting companies, free blogging sites, and I have even had threats to cease and desist from the US armed forces. Therefore I have to pay for my own server which is NOT cheap. The more people who read these article on this site the more it costs me so some support would be much appreciated.

I have backups of removed reports shown, then taken down after pressure, that show collusion between nations and the media. I have the full redacted 28/29 pages from the 9.11 commission on the site which seems to have been forgotten about as we help Saudi Arabia bomb Yemeni kids hiding in the rubble with white phosphorus, an illegal weaapon. One that the Israeli's even used when they bombed the UN compound in Gaza during Operation Cast Lead. We complain about Syrian troops (US Controlled ISIS) using chemical weapons to kill "beautiful babies". I suppose all those babies we kill in Iraq, Yemen, Somalia and Syria are just not beautiful enough for Trumps beautiful baby ratio. Plus we kill about 100 times as many as ISIS or the Syrian army have managed by a factor of about 1000 to 1.

I also have a backup of the FOX News series that looked into Israeli connections to 9.11. Obviously FOX removed that as soon as AIPAC, ADL and the rest of the Hasbra brigade protested.

I also have a copy of the the original Liberal Democrats Freedom Bill which was quickly and quietly removed from their site once they enacted and replaced with some watered down rubbish instead once they got into power. No change to police tactics, protesting or our unfair extradition treaty with the USA but we did get a stop to being clamped on private land instead of the mny great ideas in the original.

So ANY support to keep this site running would be much appreciated! I don't have much money after leaving my job and it is a choice between shutting the server or selling the domain or paying a lot of money just so I can show this material.

Material like the FSB Bombings that put Putin in power or the Google no 1 spot when you search for protecting yourself from UK Police with "how to give a no comment interview". If you see any adverts that interest you then please visit them as it helps me without you even needing to give me any money. A few clicks per visit is all it takes to help keep the servers running and tag any tweets with alternative news from the mainstream with the #altnews hashtag I created to keep it alive!

However if you don't want to use the very obvious and cost free ways (to you) to help the site and keep me writing for it then please consider making a small donation. Especially if you have a few quid sitting in your PayPal account doing nothing useful. Why not do a monthly subscription for less money instead. Will you really notice £5 a month?



css.php