Should The Fed Chairman Be More Like A CEO?
from the high-tech-central-planning dept
One of the themes we've been discussing lately is the government's perpetual missteps when it comes to technology. In a piece at News.com, the CEO of software maker Tibco argues that the Federal Reserve is a tech laggard, and that it needs to improve its ability to monitor and manage the economy. Specifically, he argues that the Fed needs to embrace real-time data, and be prepared to change interest rates at a moment's notice. It's an interesting argument; essentially he's saying that the Fed needs to act more like the managers of a business would, and accordingly it needs to adopt the latest technologies. Of course, most people would argue that the economy shouldn't be managed centrally the way a business is. It's a mistake to assume that the reason government doesn't do a good job of economic planning is because it doesn't have access to real-time data. Furthermore, considering how many government tech projects have gone awry, it's hard to imagine that it would do a good job implementing such a necessarily complicated system. A better approach, it would seem, would be to make incremental improvements to the Fed's ability to monitor the economy without completely overhauling the system.
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Fed
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Re: Fed
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Correct.
It might control parts of the government, but it is emphatically *NOT* any part of any branch of government.
Kindly enumerate where in the constitution the federal reserve gets authority, please.
An appointed private group who *own* you, and me and all of us. Deal with it.
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Re: Re: Fed
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yes, the chairmain is chosen from a list provided for him by the fed itself, but otherwise it is a privately held corporation that has never been audited.
it was not founded by congress, it was allowed to operate by act of congress, much as the other banks that have been controlling the US currency over the last few hundred years.
Need proof? look in the phone book. the federal reserve bank is NOT listed in the blue government pages, but the normal white business pages. case closed.
american "money" is created from nothing by private bankers.
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http://en.wikipedia.org/wiki/Federal_Reserve
http://www.federalreserve.gov/
The Federal Reserve was created as a check on banks -- that is, banks tend to all lend money when supply is high, and they all restrict money when supply is low, exacerbating the normal cyclical nature, creating inflation and depression. The Fed was supposed to act as a counter-balance -- for example, raising rates when money supply is high, thus artificially and gradually restricting the money supply, thereby avoiding a sudden depression (or correction or whatever else you want to call it).
Unfortunately, as with so many other "well intentioned" government schemes, the unseen consequences is that the Fed is now seen as the harbinger of the economy. If they raise rates, things must be bad, so banks pull back sharply, thus creating the exact situation the Fed was supposed to be avoiding. And we all saw how well the Fed handled the tech bubble, reporting on how good the economy was right up until it tanked. (To his credit, Greenspan did report on the 'irrational exuberance' of the market, but still did very little to contain it.)
As a result, the Fed has long outlived its usefulness. It could be dismantled tomorrow without affecting the economy at all. Unfortunately, as with so many other "well intentioned" government schemes, it's a lot easier to create than to destroy, and so will with us for a long time...
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Is the Fed all powerful? Of course not, it can advise and guide, but don't blame the internet bubble on it. Typically it makes small moves, because big moves can really screw things up.
Hell, I could be Fed Chairman, all I would have to do is read the Wall Street Journal and read what is expected of me. When was the last time the Fed surprised Wall Street?
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Re:
the writer is saying that, yes, the fed does create issues with the economy, but he's saying the solution is to use real-time data to make real-time interest adjustments, as opposed to the current way — waiting three months before correcting the economy.
this prevents the sharp pull-back you're talking about and — while it will still create some problems — will make rate changes more tolerable and less dramatic.
savings banks and other banks are still able to adjust their rates as they need, all the while using the fed funds rate as a benchmark. in effect, the changes would make the reserve more like a private bank (read: efficient).
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Rapid corrections make things worse
No it won't. More rapid corrections will simply lead to higher-frequency instabilities. That's how dynamical systems work. It's like a a car suspension without shock absorbers: putting stiffer springs simply makes it bounce up and down faster. The solution is to add dampening to the system, to actually slow down the speed at which it responds to changes.
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