The Myth of Fed Independence

In a reversal of the usual course of events, the more interesting day of Humphrey-Hawkins testimony the last two times it has occurred has been day two in the House of Representatives.  Usually House members, who by and large merely reveal their stunning levels of ignorance of anything economic through their questioning and statements, have little interesting to say and fail to elicit anything interesting from the Fed Chair.  Senators by contrast are usually better informed and better orators.  But the last couple of times this has manifested as cowardly deference to the Fed Chair whereas several House members have come out swinging with feisty lines of questioning for Madame Yellen, the speech-challenged Fed Chair, who though she sounds like she has suffered several strokes, has obviously been well coached by the Administration in the fine art of lying to Congress and the American People.

I have meant to write about this since the last testimony 6 months ago.  In that testimony, the Chair of the House Financial Services Committee Jed Hensarling of Texas, raised an interesting fact.  He brought to light a regular meeting that the Fed Chair has with Treasury and its Secretary Jack Lew.  He asked her if she would share transcripts of her conversations at these meetings and she stated that would not be possible.  Hensarling left the questions on these meetings to someone else on the Committee this time around (Huizenga from Michigan).  She similarly refused to provide information on the substance of such meetings.  One wonders why.

I will herein proffer a reason why she might hesitate.  This reason will be out there in the realm of fringe conspiracy theory.  She will not share the contents of such meetings, which she claims are private meetings which is ridiculous, because it is in these meetings wherein Barack Obama dictates to the Fed what their monetary policy will be.  After all, he believes he is personally the person best able to handle decisions for basically every realm of human activity and thought.  He likely leaves the details to the apparatchiks at Treasury and the Fed.  After all he doesn’t have time as he is so busy being the President.  But I believe it is likely he, through the Secretary of the Treasury at these weekly meetings, personally dictates to the Fed what the general thrust of policy will be.  In other words the Fed is very far from being independent.  And if you do not believe that then why would the Fed have contravened decades of established practice – to not influence political elections – by announcing QE3 just a month before the Presidential election of 2012, juicing the markets and helping Obama in the imminently pending and hotly contested election?  For that alone the Fed needs to be brought down several notches, or be disbanded altogether.

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