Wednesday, February 17, 2021

Is the Federal Reserve Monetary Policy Committee a Cult?

It is utterly remarkable, the lack of any diversity of thought amongst the members of the Federal Open Market Committee, the monetary policy-setting group within the Federal Reserve Board that is composed of Fed governors and the presidents of the Federal Reserve regional bank branches.

At the Economic Club of New York, Federal Reserve Board chairman Jay Powell said last week:

 [W]e will not tighten monetary policy solely in response to a strong labor market. Finally, to counter the adverse economic dynamics that could ensue from declines in inflation expectations in an environment where our main policy tool is more frequently constrained, we now explicitly seek to achieve inflation that averages 2 percent over time. This means that following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time in the service of keeping inflation expectations well anchored at our 2 percent longer-run goal.

And from a newer member of the Fed, San Francisco Federal Reserve president Mary Daly during a Wall Street Journal interview last week, she said:

I feel quite confident that we know how to get control of rising
inflation that’s rising too fast and too high. Where we are less experienced is in getting
inflation sustainable to our target. And in our new framework I think we’ve got some help
there, because people expect us to deliver average 2 percent inflation with a moderate
overshooting that’s sustained in order to do that averaging. So that’s going to give us a
little bit of a boost. 
But I think the greatest risk is that we get nervous and we pull back accommodation too
quickly on the fears of rapidly rising inflation or on the overconfidence that inflation’s hit
our target. And then we have more work to do to get it back up. So I would rather take the
risk of letting inflation go a little bit and pulling it back than I would stopping it short and
never getting there.

You can go up and down the list of Fed governors and regional presidents and you don't get any independent views.

Despite incredible money printing by the Federal Reserve, there are no concerned voices. They all vote for the money pumping.

From the latest Fed statement, not a single dissent:

It's a damn cult where outside voices and concerns about price inflation don't register.

It should be remembered that at one time, Federal Reserve Board chairmen marched to Capitol Hill to warn of excessive spending. Now the Fed simply monetizes it without an objection from anyone on the board.

What kind of incense are they using?



  1. It has been a while since I read Murray Rothbard's "America's Great Depression", but do you see any parallels between the 1920s Fed and today? I am curious to read that book again now.

    David B.

  2. "Village of the Damned"! A great horror flick. I saw it three times (in the theater) in 8th grade. I was also proud to have founded the George Sanders Fan Club. (our teachers thought we were weird).
    Avoid the remake. See the original.