The title was so promising: "Time to shut down the US Federal Reserve?"
I thought finally, Ambrose has combined his already wonderful commentary and analytical skills with good policy prescription skills. While he has always been very strong on calling out the establishment in a very clear, effective manner, he has been equally weak in his recommendations for actions of a different sort. Like almost all commentators, Ambrose offers prescriptions right down the middle of the Keynesian, mercantilist camp. Maybe a little more creative, but in the same ballpark.
So I see the headline of this commentary and I believe for a moment that maybe Ambrose finally has seen the light -- the cause of our boom and bust, the cause of bringing the world to its knees, the cause of transferring greater amounts of wealth to fewer and fewer people must be shut down. Bring it on Ambrose, only you can write this column so eloquently. Get rid of fiat money, no more lender of last resort, no more 100 to 1 leverage ratios, no more fractional reserve banking -- and best of all, a hard money standard. WE WANT GOLD backing our currency. GO AMBROSE!
Ambrose can write this so much better than I can -- I was giddy with anticipation to read the entire article.
"Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order. Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences)."
Well, not exactly the start I was looking for, but who am I to judge the writing style of Ambrose. Besides, the world would probably be better off if we excluded one or two of those guys from the priesthood.
The sub-quotes below are Ambrose quoting Kartik:
" 'Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”
Don’t you just love that throw-away line 'decent'? Dr Athreya hails from the University of Iowa.
'The response of the untrained to the crisis has been startling. The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.”
You couldn’t make it up, could you?
'Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.'"
This isn't right! This is Ambrose upset at the FED because they are upset with him...and others like him. A fistfight of the opinionated.
Now, I won't spend time to take on Katrik -- that is much too easy and I expect many are doing it even this minute. Suffice it to say, the entire thought that we should rely on the economic wizards to save us from the catastrophe they alone have created (well, with the help of the politicians) is laughable.
But Ambrose, for a moment, you gave me hope. Unfortunately the moment was fleeting. Then you jumped right into the policy prescriptions you would have gone for, or critiques you have of the FED's chosen path. For example, rates were kept too low for too long (a gimme), M3 was allowed to grow too fast, then too slow (or shrink), Quantitative Easing wasn't done right. And then this:
"The root error of the modern academy is to pretend (and perhaps believe, which is even less forgivable), that economics is a science and answers to Newtonian laws."
No, Ambrose. The root error of the modern academy (and economy) is to pretend (and perhaps believe, which is even less forgivable), that a handful of "experts" (or bloggers) are qualified to price fix the most fundamental item that a free-market capitalist system requires -- that is the price and quantity of money. It is central planning of the kind that we used to laugh about when the Soviets tried it -- but even they never spread the disease as fully around the world as the FED has -- or as you continue to do.
So when I read your version of what the FED did wrong and should have done differently, I think -- who are you? Just another guy with an idea. What makes you so smart that you are qualified to centrally plan and price fix the most critical factor in a modern economy fully dependant on a complex division of labor...money?
No one is qualified. No small group is qualified. The market is quite capable of properly pricing money as it is capable of pricing other goods.
It is a scheme, Ambrose. Set up to transfer wealth from the 99.9% to the 0.1%. It has worked well for 100 years. Until it dies the death it deserves, it will continue to serve this function. In every crisis, more wealth is transferred. You treat it as if a few tweaks in the policy prescriptions are what is necessary. In reality, what is required is a stake through the heart.
Given the mess that has been created, it will die from a self-inflicted wound.