A shot across the Fed’s bow from Simon Johnson, former IMF chief economist and bank critic, on the surface looks to be a good bit of news. Johnson, in a recent Project Syndicate article, warns that the notoriously cloistered central bank is overly confident about its political position.
Although Johnson is constrained by both space limits and Project Syndicate’s anodyne style, his warning is clear: the Fed is more powerful than ever despite having been wretchedly incompetent in the runup to the crisis. Many would say it has compounded its incompetence by going into “if the only tool I have is a hammer, ever problem looks like a nail” mode with ZIRP and QE. The Fed was not only silent when its input would have mattered a great deal, in the fiscal stimulus fight of 2009, but Bernanke called for deficit cutting in 2012, even as he had his foot firmly on the not-very-effective QE accelerator. The result is a flaccid economy, bubbles in many financial assets and destabilizing hot money flows sloshing through developing economies.
As a result of this misrule, Johnson contends the central bank is much closer than it recognizes to losing its vaunted independence. Johnson points out that the right wing is keen about restricting the Fed’s freedom of action, and that they are a much more serious threat than the Fed appears to understand. What happens if the Republicans gain a majority in the Senate in the midterms?
Even though Johnson is in some ways very critical of the central bank, he if anything overstated its base of support. The hostility towards the monetary authority among conservatives is perverse, given how much the Fed has done for the wealthy by showing such solicitude about asset prices. Nevertheless, it is not just the right that is unhappy with the Fed. It is pretty much anyone to the left of mainstream Democrats. Orthodox folks tend not to recognize its existence since its members are seldom welcome in polite DC company. Remember, it was Ron Paul and Alan Grayson who teamed up on Audit the Fed. And both conservative and liberal senators were responsible for putting an unheard of five holds on Bernanke’s reappointment as Fed chairman. Obama had to whip personally to get Bernanke approved.
Why the Name of This Blog?
The whole land is in desolation…there is mourning everywhere–all because the the Fisher King is wounded. (1)
Parsifal stumbles upon the Fisher King but stays quiet and misses his first opportunity. His mom or his mentor had told him: “don’t ask too many questions.”
After being raked over the coals by the “hideous damsel”, whacking his way through forests for forty years, and berated by the Hermit, Parsifal again finds the castle of the King. This time he’s got enough experience, courage and wisdom to ask a question: “Uncle, what ails Thee?” (2) In some versions, “Whom does the Grail serve?”
I can identify. I once served in a war that I didn’t believe in and did so because I was partially ignorant and also fearful of rejection by family and society.
1)Our land and rulers are wounded. Many activists are strong on this point.
2)Each of us carries the wound, too. Many spiritual and psychological folks are strong on this point.
3)It’s the approach of this weblog, following the guidance of Erich Fromm, R.D.Laing,M.L.King, Thich Nhat Hanh,Starhawk, David Edwards, and others, that “liberation”, whether individual or societal, needs work on both fronts.
Finally, not irrelevant, Parsifal, a Christian knight, has a Muslim brother, Feirefiz, whom he does not know.
(1)Johnson, Robert. He. Religious Publ. Co., 1974, p. 8.
(2)Campbell, Joseph. Creative Mythology. Viking Press, 1968, p. 561.