Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank’s hard-won independence and undermine confidence in the nearly 100-year old institution.
Reuters is the British equivalent of The New York Times – thoroughly establishment and its voice in England. When they see that the Fed’s credibility is beginning to suffer, you know that the end is near.
The article said that this was “the pervasive sentiment” at the recent Jackson Hole conference (where, as you remember, Bernanke spoke and said nothing).
Alan Blinder was there. He is the quintessential establishment economist: degrees from Princeton, the London School of Economics, and MIT. Served on Clinton’s Council of Economic Advisors and on the Board of Governors of the Fed. He dreamed up the “cash for clunkers” fiasco that was designed, according to Blinder, to stimulate the economy. We know how well that worked.
Oh yes, he’s also a member of the Council on Foreign Relations – in fact a member of the board of that gaggle of internationalists.
And he didn’t like what he saw:
I do fear for it a bit if the election comes out that way, especially if some of the more radical voices, that happen to be Republican voices nowadays, get reelected. There’s a lot of hostility.
We know who he is referring to: Ron Paul. And what he’s referring to: the bill that recently passed the House to do a full and complete audit of the Fed.
Buried in the article from Reuters was something amazing: that “radical” influence is already beginning to impact the Fed’s behavior! Part of that was reflected in Bernanke’s heavy emphasis on something he couldn’t prove: that the Fed kept things from getting worse. This is not an argument from substance but from conjecture. It was his way of defending the indefensible.
In all, the Jackson Hole conference did accomplish something: an admission by an establishment mouthpiece that the trust and credibility of the Fed continues to decline, and there’s nothing they can do about it.