In my view, it is unacceptable that the Federal Reserve has been hijacked by the very bankers it is in charge of regulating. I think the American people would be shocked to learn that Jamie Dimon, the CEO of JPMorgan Chase, served on the board of the New York Fed at the same time that his bank received a $391 billion bailout from the Federal Reserve. That is a clear conflict of interest that I would ban as president. When I am elected, the foxes will no longer be guarding the henhouse at the Fed. Under my administration, banking industry executives will no longer be allowed to serve on the Fed’s boards and handpick its members and staff.
My views and the Fed’s views on secular stagnation
First, the Fed assigns a much greater chance that we will reach 2 percent core inflation than is suggested by most available data. Inflation swaps suggest inflation on the Fed’s preferred PCE deflator measure will average only 1 percent over the next 3 years, 1.2 percent over the next 5 years and 1.5 percent over the next 10 years. Survey measures of expected inflation are falling not rising. Moreover, if account is taken of quality change inflation measures would have to be further reduced.
Second, the Fed seems to mistakenly regard 2 percent inflation as a ceiling not a target.
.. It is suggested that by raising rates the Fed gives itself room to lower them. This is tautologically true but I know of no model in which demand will be stronger in say 2018 if rates rise and then fall than if they are kept constant at zero.
.. The complexity is that zero rates may be less abnormal than is supposed because of fundamental shifts in the saving investment balance,
The Threat of Bubbles, Not Inflation, Should Guide Fed Policy
Rather than obsessing about inflation, Fed chair Janet Yellen and her colleagues should be seeking to provide as much support as they can to the economy, consistent with preventing bubbles from forming in asset markets such as stocks, bonds, and, especially, real estate. That is where the threat lies, not in rising inflation.
.. the so-called NAIRU, or Non-Accelerating Inflation Rate of Unemployment. Theoretically, the concept makes sense. Empirically, it’s extremely elusive, because it depends on many other things, such as the rate of productivity growth, tax rates, the labor-force participation rate, and the level of unionization.
Why the Fed Needs Defending
As Janet Yellen pointed out to Congress last month, the financial statements of the Fed’s board of governors and the regional reserve banks are already audited by independent accounting firms. And which other agency, after each meeting of its leaders, immediately announces the decisions it has taken and, a few weeks later, publishes a detailed summary of its discussions? Now, within about six years of its meetings to address the financial crisis, the Fed has published verbatim transcripts.
Do we know what was said in the White House when George W. Bush decided to invade Iraq? When Barack Obama decided to pull out virtually all U.S. troops from the country? Or what was discussed inside the Treasury Department when the then Secretary of the Treasury, Henry Paulson, decided to let Lehman Brothers sink? Of course we don’t. But, thanks to the Fed transcripts, we know exactly what Yellen said in March, 2009, when some Fed officials were worrying that the central bank might be trying to do too much. ”The economy is just a disaster area,” Yellen said. “In light of the outlook I would want to do everything we can.”