It is remarkable that the relatively well-paid Post editorial writers failed to notice the specifics of the division in views at the Fed. There are 5 Federal Reserve district bank presidents who are voting members of the open market committee. For practical purposes, these bank presidents are appointed by the banks within the district. These 5 bank presidents voted 3 to 2 against the statement committing the Fed to maintaining a near zero interest rate for the next two years.If you are well off and unsympathetic, then why spend government money helping the poor, the unemployed, and those who lost their homes. Let them eat cake! The real purpose of the government is to make sure that the aristocracy maintains its social standing and continues to party at the Versailles palace. That is the theory of government of the Republican party and, apparently of Barack Obama and the conservative elements of the Democratic party.
By contrast, the 5 governors, all of whom are appointed by the President and approved by Congress voted unanimously in favor of this statement. This remarkable gap between the views of people appointed by democratically elected officials and the views of people selected by the financial industry should have jumped out at anyone reviewing the minutes and the vote.
The financial industry tends to be very concerned about inflation, since this erodes the value of its assets. They are less concerned about unemployment, since top executives in the industry can do very well even in a time of high unemployment. Profits for the financial industry hit a record as a share of corporate profits in 2010. On the other hand, Fed governors who are appointed through the political process are likely to be concerned about unemployment, since this jobs are the primary concern for most people.
This break suggests that it is not just confusion that caused the divisions within the Fed, it was fundamental differences in interests. The Post editorial writers should have been able to see this.
Thursday, September 1, 2011
Here is a bit from a post by Dean Baker on his Beat the Press blog that makes it very clear that the rich bankers aren't interested in a jobs program for America or an economic recovery: