With the Federal Reserve prominently in the news again last week, having finally begun to reduce the amount of monthly stimulus, a few thoughts continue to nag at me. I offer the following for your consideration.
Having, over the decades, lectured at several nationally reputed colleges and universities, I have a very special place in my heart for men and women who dedicate themselves to educating subsequent generations. Most are very intelligent and extremely well informed in the areas of their specialty. A great many for-profit and not-for-profit organizations call upon such academicians for counsel as consultants and, in some instances, as board members. Imagine, however, a good sized corporation having a board of directors composed almost entirely of academics with virtually no direct business experience. That doesn't happen. Imagine further that it were a giant corporation like GE, Microsoft, Wal-Mart or IBM. Inconceivable! How about an entity many times bigger than any of those that has a direct effect on virtually the entire world economy? That is the Federal Reserve.
While I have spent no time studying the curricula vitae of the Fed's current board of governors, I have heard references to business experience only about Dallas Fed President Richard Fisher, who had prior hedge fund involvement. Several have served in regulatory roles, but that's far removed from hands-on business experience. How could we have arrived at the point at where we allow academicians, regardless of how intelligent, to function as world financial central planners? World business leaders have been remarkably silent about the need to interpose some practical business experience.
I can only suppose that such silence stems from not having their ox gored in recent years. For the past decade and a half or more, the Fed has done little but let the good times roll. And what corporate CEO doesn't like free flowing money. And in the past five years in which the Fed has created more than 3 trillion new dollars and has usurped far more power than was ever expressly granted to it, corporate leaders have had no cause but to celebrate.
We can only hope that common sense will soon prevail and a huge public outcry will arise against a small cadre of academics holding the reins of the world economy. The rationale for such an outcry becomes all the more obvious when we review Boston Fed President Eric Rosengren's recent description of current Fed policy as "experimental", "trial and error", and "learn by doing". And he's a supporter. It would be comical in the extreme if it were not so horrifically scary.