Politicizing the Fed

Being a quazi-public/private technical bureaucracy, the Federal Reserve is already fully politicized.

While being both public and private is supposed to give the Fed a balanced, independent quality that achieves objective results in the interest of the general welfare, the call for re-mandating its policy agenda certainly does indicate that the benefit of its enterprise is skewed.

The Fed's power is limited to achieving maximum growth while "controlling" inflation by technically correcting the money supply; a function that is anything but apolitical.

The Fed's function, growth with low inflation, is politically indicated by priority. Jobs, Main Street's interests, will follow, or lag as an indicator of prosperity.

Inflation is controlled by command of the money supply, and especially the velocity of that supply. When money becomes consolidated, the velocity (demand) slows and unemployment occurs, controlling inflation. The sequence of events, the priority, is highly political and entails a risk (the gamma risk) that must be commanded and controlled.

Inverting the hypothesis (increased velocity therefore decreased inflation) results in crisis. So, like it is now, we continue to operate with the consolidated model to keep inflation (employment) and interest rates low to finance the recovery. The evidence, however, is that the financing is being consolidated. So, for example, China tightens credit to keep capital from leveraging into monetary expansion (inflation) without growth (stagflation). The resulting slow-to-no growth controls inflation but accumulates gamma risk (accumulating at the leveraged rate) designed to present as a tradeoff--inflation or unemployment.

Since inflation depreciates the value of the accumulated capital, maintaining unemployment, by variously circuitous technical means that cuts across all jurisdictional boundaries of government, gets priority with the Fed ultimately controlling the externalities (the gamma risk presentations like a burgeoning populist sentiment that demands a legitimacy of popular consent, something that ensuring a free-market economics in priority will provide with the risk fully applied and presented, retributed, to the source).

If it is the objective charge of the Fed to promote a purely economic agenda (what political scientists refer to as a "genuine" civil service), it is powerful beyond the means of Constitutional balance of power. That, of course, is exactly what the Federalists have always wanted--for the executive to have unchecked power. The other branches are in service, or support of that executive power.

Unchecked power is hardly apolitical. It is, rather, genuinely political with an agendae of those who stand to benefit from a more centralized, non-Jeffersonian form of government.

Federalists, favoring the Hamiltonian model of government from the top down, prefer government (the consent of the governed) enterprise only by and for the pleasure of the elite. (The justice of this logic is, of course, considering it is completely illiogical, the object of that secret knowlege conservatives have that the non-elite lack. Empirically, however, income, and the means to sufficiently accumulate it, to be in the elite class is all that is lacking, and what the Fed has always been prepared to support.) The legitimacy of power is throughly political and is fully reflected in the current debate over the function and independence of the Federal Reserve in particular and the bureaucratic model of power in general.

See the article, "The Bureaucratic Model of Power and Political Economy."