Have you ever wondered why it takes 100 and some odd people to make the ‘best choice’ for monetary policy? That is how many people there are sitting the room at the FOMC meetings, all talking about their own special take on policy options and, for better or worse, deciding whether to hit us hard or soft in various degrees.
That rule by committee thing may seem wonderful, with room full of diverse options, we’re bound to get roughly right at least at some point. Perhaps kind of like putting lipstick on without a mirror. Sometimes it may turn out perfect, but most of the time a few spots could use some refinement. Or perhaps it’s being done in a car, and they hit a huge pothole while the lipstick is being applied. The huge draw back to it is that when mistakes are made, as they will inevitably be, there doesn’t seem to be anyone responsible for them or to learn the right lessons from those mistakes. Success has many fathers while failure is an orphan, and before we know it, they are back in the saddle again spouting the same rubbish that got us into trouble in the first place.
As I said back in the days running up to the nomination of Janet Yellen, I do not want a new chairperson for the Fed. Instead, I want to hear, “We have an app for that,” because we no longer live in horse and buggy days, and with the very large, dynamic and tech-driven economy we have, we need monetary policy for the information age that is precise, logical rather than political, and changes when changes are needed instead of waiting for the next meeting of mere humans who just might get it wrong. We can no longer afford the fossilized, perhaps we’ll make it up next quarter or perhaps not at all crapshoot where the broader economy takes the hit for out-of-touch committee members whose first responsibility appears to be to evade ownership of their collective choices.
It’s got to stop somewhere. If not today, when?