Giving the Fed a hard time might have a point … The transcripts of the highly significant 2009 meetings of the monetary-policy-setting Federal Open Market Committee are out today, after a five-year delay, and generating lots of headlines. These transcripts, and their release schedule, are as best I can tell unique in American government. They're also very valuable. The five-year delay is long enough that participants don't have to worry about their statements affecting markets or exposing them to immediate criticism, but short enough that the transcripts are often still relevant to current debates. – Bloomberg
Dominant Social Theme: Criticizing the Fed will create a healthier one.
Free-Market Analysis: Bloomberg has been running a series of editorials defending the Federal Reserve and criticizing those who are supporting various congressional bills to pry it open. This article is a little different because it takes the position that some additional sunlight could be a positive thing.
But even granting this is accurate, the article presents other puzzling perspectives. We've been following these editorials because they show the cognitive dissonance that lies at the heart of modern Western civilization.
The creation and circulation of money-stuff is of primary importance and when a culture is built around a process that is significantly deceptive, then gradually society itself begins to rot. This is because the finest minds and most successful individuals eventually come to understand that their societies are being perverted by a false system.
It is a poison that infects each part of the body-politic over time: education, the media, industry, commerce and, of course, the political process itself. As a result, the most gifted people of each generation realize that to succeed, they must lie compulsively. They must never tell the whole truth. They must temporize. In the 21st century, this is evident in what we call "directed history" – the idea that technocratic experts can manage entire cultures.
The cult of the expert, as we have pointed out, is an integral part of the larger deception. Paper certificates providing credibility must be handed out routinely via a corrupt educational system that supports the only thing that matters: the meme that monetary officials can see into the future with enough accuracy to entrust them with the power to guide multi-trillion dollar economies.
The emperor has no clothes. There is no possible way to justify giving a small group of good, gray men the day-to-day power to "fix" the price and volume of money going forward based on backwards-looking financial data.
In the modern era, central banks including the Fed have consistently held rates lower than they ought to be within the current fiat environment. In turn, this creates tremendous asset bubbles that eventually collapse, causing economic carnage. People lose their jobs, their homes, their marriages and their families.
In the US alone these days some 40 million are on food stamps and supposedly 90 million cannot find work or are likely working in the context of gray or black markets. The employment numbers are massaged: In fact, the head of Gallup recently claimed that US government statistics regarding employment were so optimistically skewed that they ought to be disregarded.
Over and over, repeated catastrophic booms and busts centralize bankrupt entrepreneurs, undermine valid entrepreneurial efforts and ensure that the best and most successful ventures can often be purchased at the cycle's low ebb for pennies on the dollar.
These are perhaps the underlying reasons for congressional discontent, though the actual bills now circulating tend to focus on Fed "transparency."
The delayed transcripts seem like an elegant way of balancing the Fed's need for flexibility and confidentiality with the demands of representative government. How did this well-designed experiment in government disclosure come about? Under duress.
For years, the Fed denied that it even kept transcripts of the meetings. After sustained prodding from Texas Democrat Henry Gonzalez, the chairman of the House Banking Committee in the early 1990s, Fed Chairman Alan Greenspan finally fessed up and in 1995 started releasing the transcripts with a five-year delay. It was around the same time, also under pressure from Gonzalez, that the Fed first started even announcing its interest-rate decisions.
… The "audit the Fed" legislation now spearheaded in the Senate by Ron Paul's son Rand — officially, the Federal Reserve Transparency Act — has been getting the most attention. But there's also the Federal Reserve Accountability and Transparency Act, which would add a bunch of new reporting and oversight requirements.
It is, as the article explains, the Great Recession itself and its mind-numbing economic injuries that have given wings to current legislation. Fed officials are clearly worried that this time the tide is unstoppable and that their deliberations will be exposed to hitherto unimaginable scrutiny.
What Fed officials are really worried about, from what we can tell, is the naming of names when it comes to what institutions are the recipients of Fed largesse. Showing exactly where monetary giveaways are going will immediately puncture the century-old pretense that the Fed is a deliberative and apolitical institution.
It is surely a fact that as soon as names can be placed next to money flows, conflicts of interest will rise up with such obviousness that there will be no legitimate defense. The Fed will come a long step closer to being discredited as an institution and its individual members will be exposed to significant public criticism.
That's what the Fed fears, so far as we can tell – and rightly so. The Fed has the power to print money and also apparently to give it away to whomever the institution and its officials choose. If normal people had the power to print money and hand out trillions to their friends and acquaintances, wouldn't it be logical to conclude that significant abuses would result?
But as we said at the beginning of this article, the lies are so pervasive and embedded after a century of central-bank price fixing that the ramifications we've just presented are never fully discussed. This Bloomberg article, for instance, makes the case that more transparency will "make the Fed work better."
The overall impulse to press the Fed to explain itself better and be more accountable for its actions is perfectly understandable in light of the events of the past few years … The lesson of the FOMC transcripts is that Congressional Fed-baiters sometimes have a point, and that their pressure can make the Fed work better.
The cognitive dissonance is palpable, is it not? The Fed CANNOT work better. It is a price-fixing instrument that harms the economy as all price fixing instrumentalities inevitably do. Fed officials likely would not agree with this conclusion, either, as real exposure of their deliberations would probably destroy whatever credibility is left.
And yet, as we predicted years ago, Fed transparency is on the way. The Fed as we know it today is likely finished. The more transparency that is granted, the more public indignation will demand yet more.
The Internet is a process not an episode. And these are unsettled times.