A Good Move to Remove Secrecy from Policy Moves
The Federal Reserve System receives a tremendous amount of criticism. The criticism is inversely related to the knowledge and expertise of the individual giving the criticism. The less the intelligence and knowledge of modern economics, central banking and economic policy one has, the greater than amount of criticism one delivers. Thus the explanation of the implacable opposition of people like Rep. Ron Paul (R, Tx), the soon to be former candidate for the Republican nomination for President.
The Federal Reserve Board has done about the best that they could have done in implementing policy to increase growth and employment. The reason they have not had much of an effect lies with the ineffectiveness of monetary policy in fighting a recession, not with the policy itself. Once interest rates reached a lower boundary, that was it, the monetary policy bullet had been fired and there were no other bullets left in the gun.
As things have calmed down on the monetary policy side, the Federal Reserve under the leadership of Ben Bernanke has move towards a greater openness and more rather than less communications. Mr. Bernanke has had news conferences, breaking with the tradition that the head of the Fed was an omnipotent god and unaccountable to the citizen. Now Mr. Bernanke is moving to make the Fed even more transparent.
The centerpiece of the new policies is a plan to publish the predictions of senior Fed officials about the level at which they intend to set short-term interest rates over the next three years — including when they expect to end their three-year-old commitment to keep rates near zero. The Fed also will describe the expectations of those officials for the management of the central bank’s vast investment portfolio.
Assuming these reforms are not undone by some future egomaniacal head of the Fed in the future, Mr. Bernanke will have made a great contribution to government policy, and a great contribution to economic stability. No, it won’t stiffly his critics, their ignorance will continue to lead them in their current direction, but it will make it more difficult for them to foist their ignorance on the rest of the population.