Hacker News Reader

Comment by derangedHorse | Hacker News Reader

I dislike the existence of the Fed, but I dislike the idea of the executive branch being in control of monetary policy even more. I'll be tuning in to see how the case progresses.

View on HN

Do you have an alternative to the Fed? Likes and dislikes has nothing to do with it. Or let me ask you another way — why do you dislike the Fed?

You can dislike a solution but admit that you can't think of a better solution, or specify that it is better than an even worse solution.

I can see why someone would have a issues with "a bunch of rich bankers appointed by politicians" controlling American monetary policy. But I can't really see a better way at least, until we can achieve a post-scarcity economy or something.

I’m not denying that, but that’s not how I read the comment. That comment comes across as a relief that the Fed is under attack, but is more upset that the source of attack is the executive branch.

> I can see why someone would have a issues with "a bunch of rich bankers appointed by politicians" controlling American monetary policy.

Yellen had a long academic career before going into public service (with various roles at the Fed before becoming Fed chair):

* https://en.wikipedia.org/wiki/Janet_Yellen

Bernanke had a strictly academic career before going into public service (and was/is probably one of the foremost experts on the Great Depression, something that was handy in 2008/9):

* https://en.wikipedia.org/wiki/Ben_Bernanke#Academic_and_gove...

Greenspan was in the finance world pre-Fed. Volcker was in government for his entire career pre-Fed:

* https://en.wikipedia.org/wiki/Paul_Volcker#Career

I think people over-estimate how many "rich bankers" are in the Fed, especially at the FOMC.

Bloomberg's Odd Lots podcast with some Fed members in recent years, especially the more obscure regional ones, about their work, and how they often go out and talk to local businesses about what's happening 'on the ground'.

Fair. I don't really have a preference for government, academic, or banking industry veterans.

I dislike that the Fed operates as if the happiness of the investor class is their number one priority.

> if the happiness of the investor class is their number one priority

The investor class has capital, and America is capitalist. I’m not the biggest fan either but we gotta acknowledge the reality we live in.

Of the dual mandate, which would you say prioritizes the investor class, and how would you approach it differently?

> promote maximum employment and price stability (low, stable inflation, targeting 2%)

The dual mandate says nothing about asset prices. The only prices it mentions are those involved in CPI calcs.

You asked about which piece "of the dual mandate", but the OP said "operates as" which I am going to reply to.

Does the Fed can any data from labor sources or unions? I am asking in honest because the few reports from them that I have looked into(mostly around unemployment) all seem to be polls solely sourced from investor class assets like companies.

If they are only sourcing from one biased source for their data, they wouldn't have to have a bad mandate or manipulate it, to operate like it was for the benefit of the data source, right?

The libertarian view is that interest rates should be decided by the free market and not a central bank. Mainly due to what we're seeing now (the executive trying to take it over) and that a small board of people can make bad decisions that have reaching effects.

I wonder if any libertarians have considered reading about the history of banking?

The Federal Reserve was not created “just because”. The US banking system was wildly unstable when run… largely as the libertarian view would have it.

This is actually quite correct. The Fed Funds policy interest rate is a clumsy instrument because it involves chasing the ever-shifting balancing point of an inherently unstable system. You "cut" rates to increase money creation, which actually pushes your long-term rates higher due to expected inflation and leads to even more money creation for a constant policy rate, and vice versa. This can all be fixed very simply by changing the instrument to a crawling exchange rate peg, which has an inherently stabilizing effect, as seen from the effectiveness of currency board systems - that system doesn't shift against you if you stick to a bad peg, whereas it very much does if you stick to a bad policy rate.

The long term policy goal (stability in the path of nominal incomes (prices + real activity) in the very short run, and prices in the medium-to-long run) would be unaffected, but the whole operational aspect would be simplified quite a bit.

> The Fed Funds policy interest rate is a clumsy instrument because it involves chasing the ever-shifting balancing point of an inherently unstable system.

I don't know about "inherently unstable system", given that as central bank independence has grown so has, generally speaking, monetary stability:

* https://en.wikipedia.org/wiki/Great_Moderation

Great Moderation basically involved the adoption of price stability as a long-term policy target, as opposed to trying to keep long-term fixed exchange rates. There's no reason to change the policy target, the issue is wrt. the policy mechanism/instrument.

Markets don't always seek equilibrium. Some aspects of the economy tend to be governed by vicious and virtuous feedback cycles. Always leaving everything to markets feels like more of a religion than a reasonable policy position.

I believe the fed replaced the gold standard.

No it did not. I don't know why people repeat this so often but it is very frustrating. Nixon unilaterally ended the gold standard because the US was printing money to pay for Vietnam and the rest of the world called the US on its bullshit. The end of the gold standard is relatively recent in history and the verdict is still out on the impact.

The post-World War II Bretton Woods system was a limited form of the pre 1920s depression gold standard.

Both the silver standard and bimetallism have been more common than the gold standard.

Tying complex multi faceted economies to the physical abundance of specific raw materials fails to capture the full value of activities and assets.

The true gold standard was a blip from the 1870s to the early 1920s.

I think your observation assumes that inflating the value of gold relative to the rest of economy is a problem - if you do not care about that I'm not sure it matters.

In any case gold served as a strong check on monetary policy even if it had problems. Certainly it is possible to have a "sound" monetary policy without gold. I'm just not convinced in societies ability to affect sound governance of monetary policy without some "stronger" guard rails. Especially not in today's climate.

>I don't know why people repeat this so often but it is very frustrating.

The Ron Paul fandom spread this myth around incessantly during the late 2000s.

The eradication of the Fed and fiat money. As others have expressed, I also think the interest rate mechanism is clumsy and that bailouts do more harm in the long term than good (see one of the most recent examples [1]).

[1] https://www.wsj.com/finance/banking/the-fed-launched-a-bank-...

What are some of the problems with eradication of fiat currency?

Gold is heavy and difficult to verify it's purity and authenticity

> > why do you dislike the Fed?

It prevents banks from doing their job, so does the existence of t-bills.

They hinder the economy by suppressing creativity and ingenuity . Every time a person becomes an investor instead of an inventor the economy and prosperity of a nation falthers.

You just don't see it in stats because stats can't measure against hypotheticals but that doesn't mean it isn't true

> Do you have an alternative to the Fed?

The appears to be difficult for a lot of people to like, but the Fed still exists because the people who bitch and moan about the Fed can never voice an alternative that wouldn't immediately destroy everything if it were implemented.

Oh that's bothersome, and it's too late to edit. Above sentence should begin "The Fed."

The FED is much maligned, but has brought a lot of stability to the economy.

Monetary policy is actually under the purview of the legislative branch.

Section 8: Congress shall have the power ... To coin Money, regulate the Value thereof ...

You probably don't them in control, either.

Who should own the money printer if it’s not the feds?

No one. We should be on a hard money standard. The Fed shouldn't be able to socialize the impact of bad business decisions like what was recently done with Silicon Valley Bank using the BTFP. Sometimes consequences need to be realized, even at the cost of bad downstream impact to those indirectly involved. It's the only way for more resilient systems to arise since our current system interrupts important feedback mechanisms.

Reply on news.ycombinator.com