It’s guest speaker time! Will Cummings, a professor of political economy at Grossmont College, has agreed to come talk to us about the future of the Federal Reserve. The Fed, as many of you know, is the most important government (well, quasi-government) institution outside besides the Presidency. Basically, the Fed is charged by law to do all it can to ensure maximum employment, stable prices and moderate long-term interest rates. Under Chairman Ben Bernanke, it probably saved us all from economic depression in 2007-08, but it did so by taking extraordinary actions that may in the long term limit its ability to achieve those goals. Many people think the Fed should also be responsible for preventing financial bubbles, but that us hard to do.
Now, President Obama has nominated Janet Yellen, a serving Fed board member, to replace Bernanke. Since the Fed is supposed to be politically independent, naming a new chair is one of the few opportunities to influence the institution. Bruce, among others, wanted us to use this opportunity, too, to debate the Federal Reserve’s priorities and future.
Will is going to walk us through the basics, focusing on the big policy questions. Fear not! How the Fed does what it does is very technical, but questions about what it’s priorities should be and who it should be listening to are not. Regular people can debate this without getting into finance-speak.
Discussion Questions –
- Basics: What is the Federal Reserve and what is its mission/mandate; i.e, what is it supposed to be doing? Also, how does it do it?
- Bigger picture: How political is the Fed? Whose interests does it serve? Ours? Big Finance’s? Both (by ensuring economic growth and stability)?
- The New Fed: What extraordinary measures has the Fed taken to help the economy since 2008? Did they help or hurt? What risks (of future inflation, say) do they pose? Should they stop doing it?
- Tomorrow’s Fed: What are the big issues facing Yellen? What, if anything, should the Fed do differently in the future?
Links – [Saturday night – I’ve prioritized these readings and added a few.]
What is the Fed and how has its role changed dramatically recently?
- What does the Fed do, and what has it been doing lately; i.e., since the 2008 meltdown? More here.
- The revolutionary new ways the Fed started operating in the wake of the 2008 financial meltdown. Recommended.
What Should Fed do now?
- Five big challenges it faces.
- The Fed’s role as bank regulator is what really matters now.
- The basic liberal view of what the Fed should do now to help the economy.
- NEW: Krugman expresses it best. Recommended, or the previous one on liberal view.
- There is no inflation to fight! None, says a former Reagan/Bush official.
- NEW: A more conservative view of what the Fed should do. Read if you understand this stuff a bit.
BTW, on politicizing the Fed –
- The Fed is “political” even when it’s independent.
NEXT WEEK: Detroit, et. al.? How to handle looming local and state bankruptcies. I swear this will be interesting.