Since news broke that Taylor won the Senate Fed Chair straw poll late Friday, there was a small tightening of TIPS spreads. 5 and 10 year spreads are around 1.8% with the 30 year spread standing at 1.0% at the close on Wednesday (no inflationary pressure as far as the eye can see!). So while Bloomberg lists the Taylor rule recommending 3.25% as the appropriate FF rate, it appears to be regarded broadly as mere conjecture, and with Taylor representing hardly a departure from the status quo.
From my point of view, however, the news of the selection having been narrowed down to either Powell or Taylor is nothing short of disappointing. With the current state of affairs of living a hair or two short of recession due to an ultra-conservative approach to macro prudential policy hardly just. I always believed the paternalism in Sarbanes-Oxley to be harmful on top of useless, but the management of monetary policy with the same attitude of denial of economic resources out of distrusting average people with them, as if we cannot miss what we’ll never have and we are better off without it, is nothing short of SO on steroids with blunt force.
I think it is safe to say that with these picks the Trump economic package is truly nothing more than bluster. He promised much more than the status quo and will deliver less, and whether it will be delivered non-calamitously remains to be seen. Though I suppose the reality is that the central planning zeitgeist is difficult to buck no matter who we put into the White House, and perhaps it’s time for a paradigm shift that will solve the economic and political problems caused by the ongoing monetary straightjacket.
In the past I have presented a book about the history of the 19th century American Whig Party that is mainly about the political dynamic between Whigs and Jacksonians that influenced the formation of our current monetary system. Whig economic policy consisted of utilizing banks to encourage economic development. The Jacksonians were highly skeptical of banking institutions in general and they did everything possible from banning small bills to full frontal assaults on banking instructions in order to prevent debt-based development. The book quoted Jackson as posing the rhetorical question, “What do farmers need with bank notes?”
Early on when the Jacksonians appeared to have won the argument over the national bank, and having won many state houses the Whigs turned to state-chartered banks in order to affect their desires at the state level instead, and were largely successful. The Erie Canal and other projects such as water systems and roads were financed by state-chartered banks and they were also open to the public during the 1830’s and 40’s, eventually becoming the basis of banking toward the latter half of the 1800’s until the creation of the Federal Reserve and the dollar and Federal banking monopoly in second decade of the 20th century.
There are many who believe the creation of the Federal Reserve and the dollar monopoly as a grave mistake over the system built by the Whigs. The point is hardly debatable while considering economic developments during the three decades after its creation and its utter shorting out of the population, again during the 1970’s and on to the Great Recession, and also while considering the unseen harm caused in between its stints of non-crisis lasting not more than a few decades such as now. And as I have learned much more about the nature of the beastly central planning zeitgeist that locks us down to tragic economic problems over my years of blogging, the more I am inclined to agree that it does more harm than good in varying degrees with all of us at its unmerciful whims, unable to persuade the political system to reform it no matter how we vote.
It has to end and it can end if the states step up. The states do not have the ability to issue currency, but they are still constitutionally sovereign and have retained the ability to charter banks. Unlike the banks chartered by the Whigs, these could be commodities or derivative banks that would hold crypto-currency as such, not as money, and issue some lower order cypher according to their fractional reserve. We have the tech currently right in our pockets to be able to manage individual holdings of all 50 states’ independent crypto-commodities that could be electronically and instantly traded for dollars and dollar denominated goods (I say with a Whigish wink to the macro-prudential Jacksonians).
The plan could work toward putting an end to this nightmare and allow us to put the control over our economic destiny back closer to home and within constitutional order.