While everyone’s going crazy about George Bush’s nomination of Harriet Miers to the U.S. Supreme Court, it’s come to my attention that Federal Reserve chairman Alan Greenspan is retiring, and Bush is getting ready to nominate someone to replace him.
During Tuesday’s press conference, Bush said that it’s “important that whomever I pick is viewed as an independent person from politics. It’s this independence of the Fed that gives people not only here in America, but the world, confidence.”
“I, frankly, haven’t seen any — personally haven’t seen any names yet, because part of the process is to surface some names internally. But also, part of the process is to reach outside the White House and solicit opinions. And I’ll name the person at an appropriate time,” he said.
So who’s on the short list? I actually paid some money to find out.
The White House is believed to be searching for a candidate who commands deep respect in financial markets, and a CEO-type background appears to be a plus as well. Mr. Greenspan ran his own forecasting firm when he was nominated in 1987. He had also been chairman of President Ford’s Council of Economic Advisers from 1974 to 1977.
Mr. Bush’s two recent choices for the Supreme Court offer contrasting models for the Fed selection. Outside economists hope the president follows the model of Chief Justice John Roberts, whose technical qualifications were impeccable, rather than Harriet Miers, who appeared to benefit greatly from her long, close association with Mr. Bush.
“If you look all around the world, the central banks that are the most effective are the ones [whose] head is viewed as independent,” not because they are statutorily independent but that they have the stature to do and say what they think is right, said Kenneth Rogoff, a professor of economics at Harvard University. He predicted Mr. Bush wouldn’t pick “an obscure appointee without an obvious background except being one of his friends.”
Ray Stone, of the financial markets research firm Stone & McCarthy Research Associates in Princeton, N.J., said independence “gives credibility to the financial markets.” Because of large budget deficits, “to have a non-independent Fed chair one might worry whether interest rates would be held lower than otherwise and the inflationary risk is much higher.”
Mr. Stone said the significance of Mr. Bush’s remarks for various candidates depends on the definition of independent. Glenn Hubbard and Ben Bernanke arguably aren’t independent, because of their service on Mr. Bush’s Council of Economic Advisers, he said.
Another candidate, Larry Lindsey, advised Mr. Bush when he was first running for president and was the first director of his National Economic Council. Martin Feldstein of Harvard University was chairman of President Reagan’s CEA. But he was far from a lockstep follower of White House dictates: His willingness to consider higher taxes to tackle the deficit isolated him from other members of the administration. Still, none of those potential candidates is considered a personal friend or a particularly close associate of the president.
More independent choices could include current members of the Fed board of governors, such as Roger Ferguson, a Democrat, and Don Kohn, an independent. But administration officials say their candidate should share their economic philosophy — a high bar for non-Republicans. — Wall Street Journal
This seems like a good time to point out the dangers of a fiat currency such as the U.S. dollar. Inflation (and hyperinflation) is the most obvious such danger, though we’ve been living with it so long we don’t recognize it as a bad thing. But that U.S. dollar has lost 96% of its value to inflation since the creation of the Federal Reserve. That’s right, your $1 bill is worth FOUR CENTS in 1913 dollars.
You’re better off with a currency that has intrinsic value, such as the Liberty Dollar. I have about $30 Liberty Dollars on hand as I write this. And yes, they’re perfectly legal, but that’s because no one is obligated to accept them. Though in my experience, very few people don’t accept these beautiful silver pieces. “Just as FedEx brought competition to the Post Office and it became incredibly successful, The Liberty Dollar emulates the same model by bringing competition to our country’s money,” said Bernard Von NotHaus, who created the currency.
At the very least, you should take some time to educate yourself about the nature of money. It’s not nearly as complex as some would like you to think it is.