"Fed independence" has always been kind of a ruse. The theory is Congress would want to print money so they can spend it, so you need someone whose job it is to not do that. But then Congress just borrows the money instead, which forces the Fed to respond to keep interest rates where they want them, with the result that they still end up de facto printing trillions of dollars at the behest of Congress.
To some extent the "independence" is even worse, because the Fed has limited ways it can respond to what Congress does and "long-term cause individual debt to get completely out of hand" is one of their primary effects, which is pretty bad and plausibly worse than inflation having been slightly higher over the same period.
You essentially need someone with the structural incentive to limit excessive spending to be in a position to actually do that. In the original design that was the US Senate, because Senators were elected by the state legislatures who would then prefer programs to be implemented at the state level unless there was a reason to do them at the federal level. It's not a coincidence that the massive expansion of the federal government happened pretty much immediately after that was changed to make Senators directly elected.
Changing it back would probably work, but it's also a good example of the kind of thing that can work. You find someone whose incentive is to say no unless then answer should definitely actually be yes and you give them the ability to say no.
I have no idea about his credentials or suitability for the job, but Warsh is the son in law of Trump's buddy Ronald Lauder. I get the feeling he's not picking people he doesn't think he can control.
Fed independence is damaged but it was never as independent as it should have been.
No one since Volcker has been a real hawk. It hasn't led to hyperinflation, just a continual debasement that has served many purposes.
"Fed independence" has always been kind of a ruse. The theory is Congress would want to print money so they can spend it, so you need someone whose job it is to not do that. But then Congress just borrows the money instead, which forces the Fed to respond to keep interest rates where they want them, with the result that they still end up de facto printing trillions of dollars at the behest of Congress.
To some extent the "independence" is even worse, because the Fed has limited ways it can respond to what Congress does and "long-term cause individual debt to get completely out of hand" is one of their primary effects, which is pretty bad and plausibly worse than inflation having been slightly higher over the same period.
Good points -- what do you think would be effective ways to improve the institutions/incentives?
You essentially need someone with the structural incentive to limit excessive spending to be in a position to actually do that. In the original design that was the US Senate, because Senators were elected by the state legislatures who would then prefer programs to be implemented at the state level unless there was a reason to do them at the federal level. It's not a coincidence that the massive expansion of the federal government happened pretty much immediately after that was changed to make Senators directly elected.
Changing it back would probably work, but it's also a good example of the kind of thing that can work. You find someone whose incentive is to say no unless then answer should definitely actually be yes and you give them the ability to say no.
I have no idea about his credentials or suitability for the job, but Warsh is the son in law of Trump's buddy Ronald Lauder. I get the feeling he's not picking people he doesn't think he can control.
> I get the feeling he's not picking people he doesn't think he can control.
The irony in wanting to control people when you lack self control.