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Today Financial Journalism Suffered An Epic Failure
Today Financial Journalism Suffered An Epic Failure
Earlier today we reported about a very sad development for the freedom of speech, or at least the illusion thereof, when one of, if not the best, critical Federal Reserve reporter in the mainstream media, WSJ’s Pedro da Costa founds he was no longer “invited” to the Fed’s quarterly press conference. His transgression: daring to ask Yellen some very uncomfortable questions during the March 2015 press conference. To wit:
PEDRO DA COSTA. Pedro da Costa with Dow Jones Newswires. I guess I have two follow-ups, one with regard to Craig’s question. So, before the IG’s investigation, according to Republican Congressman Hensarling’s letter to your office, he says that, “It is my understanding that although the Federal Reserve’s General Counsel was initially involved in this investigation, the inquiry was dropped at the request of several members of the FOMC.” Now, that predates the IG. I want to know if you could tell us who are these members of the FOMC who struck down this investigation? And doesn’t not revealing these facts kind of go directly against the sort of transparency and accountability that you’re trying to bring to the centralCHAIR YELLEN. That is an allegation that I don’t believe has any basis in fact. I’m not going to go into the details, but I don’t know where that piece of information could possibly have come from.
As it turns out, the allegation did have “basis in fact” because two months after this exchange, we learned that not only was there a parallel investigation into the Fed’s leaks in addition to the Hensarling subpoena, a criminal one by the Department of Justice at that, but that the Fed had indeed declined to comply with the subpoena as Pedro suggested.
The former Reuters reporter also had this testy exchange.
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The Inevitable Failure of Mechanistic Monetary Policy
The Inevitable Failure of Mechanistic Monetary Policy
Our current faith in central banks’ ability to “make the economy all better, all the time” is horrendously misplaced.
We are living in the Cargo Cult Era of Central Bankers. The era began in earnest on December 5, 1996, when Federal Reserve chairman Alan Greenspan cautiously wondered aloud if the stock market was exhibiting “irrational exuberance.”
The stock market promptly tanked. In this era, the utterances of central bankers exert more influence over markets than fundamentals.
Documentary film maker Adam Curtis explored the inherent limits of mechanistic monetary models in Episode 3 of his 6-part series, Pandora’s Box (1992).This simplistic faith in the Cargo Cult magic of central banks is based on the absurd notion that two levers–interest rates and buying debt–can control and guide an immensely complex economy. Central bankers are well-versed in arcane incantations such as Operation Twist and aggregate demand, but if we strip away the mumbo-jumbo we find only two levers: interest rates and the purchase of debt.
The wizards of monetary policy make the implicit assumption that monetary policy is the most important factor in an economy’s expansion or contraction. But an economy is far more than interest rates, inflation and the purchase of bonds and other assets.
An economy is also the education or mis-education of the next generation of workers, the creative destruction wrought by technologies, the cultural appetite for risk and what I call the infrastructure of opportunity–the complex mix of attributes that either encourage social mobility or preclude it.
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