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| I think you and I have a lot of common ground on our feelings and some differences. That's what makes the world go round.
IMO there does need to be a central bank and central banks are always controlled by those with the biggest guns. The US gov has big guns. So I can go along with the structure of the Fed and I will even admit it is likely a good thing the Aldrich Plan was struck down in favor of one assigning the government with controlling interest. In theory, the citizens vote for President and Congress, who then set the appointments. So in theory the appointed Fed governors are accountable to the people - in theory... In reality, they probably do try hard, but are human. And they are arrogant and probably compromised. You don't rise to that level without thinking very highly of yourself and promising the right things to the right people.
There is a need for a central bank to set monetary policy to aid in preventing panics and bank runs of the past. No doubt there is a great benefit to insured bank deposits, most safety and soundness regulations, and having a lender of last resort. Where I am extremely frustrated is how far the Fed has gone in their influence over natural markets. Even if they did so with good intentions - it was arrogant. The Fed can and should price overnight debt to banks, that is the rate banks pay to borrow funds overnight against their held treasuries. The open market can and should price longer term debt. If Congress wants to run deficits and issue a bunch of treasury bonds, the Fed has no business buying them. QE was reckless because the open market was no longer assigning market prices.
During COVID, the Fed took this to the ultimate extreme. They bought $80B of treasuries and $40B of MBS per month. What business again does the central bank have in keeping already low mortgage rates artificially even lower? If it were necessary to facilitate market functions during the peak of the COVID panic, it should have ended by August of 2020 and long before pushing retail mortgage rates to sub 3%. The buying lasted into 2022. Small amounts of market turbulence is healthy - it shakes out players who are playing too aggressively. To big to fail should probably mean too big to play and Theodore Roosevelt's trust busting may be appropriate to ensure this.
Your last point about the Fed being accountable to nobody is accurate in my opinion. They are technically accountable to Congress, and therefore the people. But Congress has it's own agenda of playing Santa Clause to the voters. I believe instead of accountability reform, let's just reduce the powers of the Fed and let the free market handle more.
So that is for monetary policy. Inflation can and does come from fiscal policy as well, which the Fed has no control over. That is Congress. So even with no central bank, there would still be inflation and likely with more volatility. | |
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The main reason Interest rates will go unchanged through November
