What If the Fed Isn't All That Competent or Apolitical?
Prof. Alan Blinder ("Fed Hawks vs. Doves: The Sequel," op-ed, May 20) states that "we have a smart, competent and apolitical Fed." Many would disagree.</br></br>Smart? Within the confines of academic standards, there is no doubt. However, there are many kinds of "smart."</br></br>Competent? In a recent interview, Dallas Fed President Richard Fisher stated: "the Federal Reserve should not be involved in the business of deciding which assets you invest in. We've driven yields . . . to the lowest rates, in what, 237 years of U.S. history. Which direction do we go from here? And how long can we do that? . . . we are playing a central role in American capitalism here . . . and I think it is a dangerous place to be. I worry about the fact that we've painted ourselves into a corner which is going to very hard to get out of."</br></br>Apolitical? Members of the Board of Governors are presidential appointees, approved by the Senate. They are in the sixth year of a program which, like any bureaucratic intervention, creates selected winners and losers by fiat. They are vainly attempting to execute their mandates without the required complementary fiscal policy, and as a result they are supplanting our elected representatives' responsibilities regarding the economy without being subject to election, appeal or recall. No thinking person could conclude that Fed decisions are "apolitical."</br></br>Despite the increasing burdens of bureaucracy, what remains of capitalism will eventually survive. The Fed can claim that its intervention was responsible, capital markets will once again have some bearing on interest rates, and we can all settle in to the new normal, awaiting the next government-induced crisis.