My personal preference is "neither", but Cowen undermines his answer by saying "people in most cases, but not in technical areas, specifically, the Federal reserve".
If I had to pick a single area where faculty rule would be most appropriate, it is the Federal Reserve. (The Environmental Protection Agency would be another candidate.) Very few citizens understand such basic concepts as how inflation rates are calculated, the differences between real and nominal rates of interest, or how the shadow banking system is supposed to work, much less tripartite repurchase agreements or the Basel capital standards. The complexities increase every year, and it is no accident that the last two Fed chairs have been drawn from the highest ranks of academic economists.Unfortunately, the Federal Reserve is the one area where experts have been most wrong, and have caused the most harm to the people.
1. Congress has given the Fed contradictory objectives.
ReplyDelete2. Congress expects the Fed to solve all economic problems.
3. Congress has created an economic environment that promotes credit use but does not also promote accelerated repayment of debt. This tilt toward credit use (and debt accumulation) makes most economic problems impossible to solve. The Fed takes the blame.
1 and 2 are true.
ReplyDeleteBut the experts at the Fed have also told Congress (and themselves) a load of nonsense around how the monetary system, and the economy, actually works.
Blind leading the blind.
3. I have no problem with credit. It's how economies grow. Debt accumulation is not a problem in and of itself. Read the link.
"3. I have no problem with credit. It's how economies grow. Debt accumulation is not a problem in and of itself."
ReplyDeleteSo you are saying there is a definite benefit from the use of credit, and no corresponding cost from the debt created by credit use.
I cannot agree.