Friday, September 18, 2009

Priceless: How the Federal Reserve Bought the Economics Profession

Well, here you have it. Every time you see some shill touting the greatness of the Fed, the strength of our economy, and the necessity of the Fed's monetary policies, as well as the dangers posed by government meddling in its affairs - ie Ron Paul - you know whose pocket they're in. This is what happens when you give a private banking cartel a printing press that can print up as much fiat money as they please, and no other money is accepted. You buy the media. You buy the military. You buy the political process. And you buy the economists to discourage anyone from challenging your power. It goes to show how stupefied we were as a nation, even 96 years ago, that, not only does nobody have a clue how the Fed works today, people couldn't see this as the obvious outcome in 1913 when they allowed its creation.

    Huffington Post -

    The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

    This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

    "The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

    One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past.

    The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."

    The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.

    Despite all this, Bernanke has been nominated for a second term by President Obama.

    In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.

    Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."

    So who seduced them?

    The Fed did it.

There is so much more to this article. Read it all...