A post to review topics that caught my attention this during the first quarter this year. I had originally intended to do a summary of the whole year in one post. But the volume of content ended up being much larger than the idea. So I will instead being doing the full review in installments over the course of the weekend.
In January, I was writing about the SNB’s decision to end the euro peg, thinking it must have been a mistake and that the central bankers there needed some time to fix it. That story seemed to fade away afterward. In Q1, Swiss GDP slipped into negative territory at -0.3%. Q2 was positive growth at 0.2%, with zero for Q3. The quarterly trend had been around 0.7%; and so, compared to the magnitude of the shock, it looks like the SNB tried to make up for it, but fell short, contracting its economy by six basis points through Q3 compared to recent trend.
I don’t know what those six basis points equal in dollar terms, probably at least in the tens of billions range. And I wonder about the principles behind the SNB’s decision to terminate the peg, if it weren’t something like choking on nickels while forcing its broader economy, Swiss citizens and the government in general to eat billion-dollar bills by the palate in terms of opportunity cost and realized cost with just that much more social spending required to support people who would otherwise have been working and paying taxes, which probably goes for corporations as well.
And of course, then we have these central bankers in awe over our concern about accountability. But it stands to reason that unelected bureaucrats shouldn’t be able to rack up that kind of bill for society to pay without at least some sort of cost analysis and democratic process behind it. So I wonder when we might end up hearing the bones rattling around at the SNB because somebody over there really needs to be fired.
In January, I was also writing about the launch of the Duda/Sumner partnership. Art Laffer became a convert and proposed a guaranteed wage. David Beckworth challenged “Secular Stagnation.” Brad DeLong criticized inflation targeting. The Fed released a report from its Independent Foreclosure Review, outlining a rather chaotic process.
In February, I wrote about the Fed’s reverse repo, similar in effect of IoR for the planet. And of which, when the rate hike came, the cap was removed in order for the NY Fed to do as much with it operationally as needed to hit the new interest rate target.
The inflation target, however, is what needs the attention more than the interest rate target, and I really wish the Fed focused as many resources on hitting its official target as it does toward this diversional one. Having a distracted central bank is not healthy situation. And I hate to disappoint Yellen and crew, but there needs to be accountability at the Fed for the billion-dollar bills in real and opportunity cost we are being force fed as a result of the distraction before it gets out of hand as the last “tightening cycle” did.
Also in February, The Republican National Committee (RNC) passed a resolution to bring the unelected bureaucrats under more scrutiny that included this point:
WHEREAS, the increasing importance of unelected federal agencies in structuring the legal environment in which American citizens and businesses operate, and the relative lack of oversight by Congress, represents an erosion of “representative” democracy;
This resolution, as good as it is, went absolutely nowhere. So much for being resolved. Unelected bureaucrats are still running amuck and we’re still being blindsided daily, including Fed antics, with no relief in sight. And it really isn’t any wonder then that Boehner is now retired. One down, with Mitch McConnell still to go.
Greece proposed to swap its debt securities for NGDP-linked bonds during its negotiations to solve the Greek debt tragedy. That proposal went nowhere, of course, which really is too bad because now they are paying yesterday’s debt with today’s income and will end up in the same pile of disaster in the medium term.
Bill Woolsey, in February, supported “Audit the Fed.” In response, I did a post suggesting we’d get farther with accountability for the performance of monetary policy than digging through the Fed’s accounting. Later on in the year, I also pointed out the appearance of smoke over possible corruption fires; and I think that if we do an audit, it should be much broader and the SEC should be involved to be sure that our present and recent FOMC members are on the up and up.
In March, I was writing about the Federal Reserve’s police force which I dovetailed with the accountability issue. This force is financed by the Fed and is not regulated by Congressional oversight. I was in complete awe at how we can have this armed law enforcement with no democratic control over it. Amazing.
In March, I was also discovered more detail on the storyline on Former Fed Governor Warsh. This time it wasn’t in a media publication. No, his connection to Citi Bank became quite clear in the Fed transcripts from 2009. I had found the missing link. It’s amazing that this sort of conflict of interest was just hanging out there in the open at the Fed, as if it were natural.