Fixing the Fed

12 minute video presentation from Thomas Palley on how to reform the Federal Reserve (hat tip: Yves Smith).

The short form of Dr. Palley’s proposal is nationalize the Fed, give it more power, broaden its intellectual base.

Frankly, although I completely agree with him on the failure of the Fed to satisfy its mandate and the reasons behind it, I’m skeptical of his prescription. Were the SEC or the other various government agencies notably successful in meeting their own mandates? Maintain a broad intellectual base? Quite to the contrary some of the agencies acknowledged that even though they had both the power and the mandate they simply dropped the ball. Why would a nationalize Fed be any different?

I’d rather see the Fed’s mandate limited, the more politically-charged components stripped away, and that the governors and chairman be held strictly accountable for failures of oversight and management on their watch.

As thought that’s likely to happen. I think the Powers That Be like the way it is now. It provides for maximum impact with minimum accountability. It’s perfect.

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