Janet Yellen Becomes Fed Chair

As usual, I find Russ Roberts’s opinion sound and wise. His concluding sentence:

But until the political incentives change, who is chair of the Fed is simply not important as we pretend it is. I expect Janet Yellen to be more of the same.

On the Fed in general, here is a passage from Free Our Markets (p. 228):

The Fed itself is an important—maybe the most important—government intervention in our economy.

The Fed is a government-created central bank.  The fundamental interventions that it represents … are 1) its legal monopoly on paper money issue and 2) the irredeemability of the Fed’s money in any underlying commodity such as gold or silver.  These two legislated privileges, starkly at odds with freedom of exchange, exempt the Fed from market discipline. …

Fed officials…, lacking feedback from an unhampered market, cannot know the right quantity of money to supply or the right level of interest rates to try to achieve, no matter how conscientious they might be.  Furthermore, the Fed’s legal authority to control the lifeblood of the economy, money, gives special interest groups, including Congress and the President, a strong, unhealthy incentive to try to capture the money-creation process, pressuring the Fed to act in their particular interest at the expense of others. Almost always this pressure is to produce more money in order to keep interest rates artificially low.

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