Gary North’s Reality Check
Charles Evans is the president of the privately owned Federal Reserve Bank of Chicago. On January 14, he gave a speech in Hong Kong. As with all speeches by Federal Reserve Bank officers, except for Bernanke the Boring, he was careful to say that his views were only his own. “Before I begin, let me say that the views I express here are my own and do not necessarily reflect the views of my colleagues on the Federal Open Market Committee (FOMC) or within the Federal Reserve System.” This, of course, is utter poppycock. No outfit in Hong Kong pays good Chinese currency to buy US dollars in order to hire the president of the Federal Reserve Bank of Chicago to fly to Hong Kong and give a speech based solely on his opinions. He was flown there in order to get insight into what a member of the Federal Open Market Committee thinks.
What he thinks is standard Federal Reserve nonsense. But it is always nice to refresh our memories about how such ideas really are nonsense.
TRANSPARENCY, SO CALLED
First, he reaffirmed the myth that the Federal Reserve System has an interest in letting the public know what it is doing and why. He spoke about the new “transparency.” Well, if the Federal Reserve had ever wanted transparency, it could have had it at any time over the last century. It has never wanted transparency. It has fought Congress tooth and nail every time Congress has attempted to get a little more transparency. Bernanke refused to appear before Ron Paul’s subcommittee on monetary policy. So, what you are about to read is a con job, and anyone who believes it is a blithering idiot.
Recently, the FOMC has made significant changes in its communications by providing economic guidelines for the conduct of future monetary policy. This is part of a larger strategy intended to make monetary policy more transparent and predictable to the public — which we feel can increase the efficacy of our efforts to achieve our dual mandate goals of price stability and maximum sustainable employment.
Transparency would begin with an outside audit of the Federal Reserve System by the Government Accountability Office. It would be conducted annually, with this attention paid to any foreign legal claims on the gold that is held for the federal government by the Federal Reserve Bank of New York. The FED refuses to allow this. Congress does not require it. Congress does what it is told to do by the real powers, which are not the voters back home.
He accurately referred to monetary policy as highly accommodative. “In the current setting, such efforts have meant maintaining a highly accommodative monetary policy well after the end of the financial crisis and steep recession.” The phrase “highly accommodative” means monetary base inflation on a scale never seen before in Federal Reserve peacetime history. He justified this policy. “We have had to do so because the economic recovery has been quite modest by any standard and because we continue to face numerous near-term obstacles to growth.”
(For the rest of my article, click the link.)