Former Treasury Secretary Summers Calls For End Of Fed Independence

Tyler Durden's picture

At an event in Davos, Switzerland earlier today, Former U.S. Treasury Secretary, Larry Summers, argued that Central Bank independence from national governments should be scrapped in favor of a coordinated effort between politicians, central bankers and treasury to engineer inflation.  Seems reasonable, right?...what could possibly go wrong?

According to Market Watch, Summers argued that Central Bank independence came from "an understanding of the macroeconomic policy problem that is not relevant to current times."  Ironically, he argued that Central Bank "insulation" was required in the 70s/80s when the "White House" and "Congress" could not be trusted to fight inflation. 

So does this indicate that Summers' baseline assumption is that politicians today are more trustworthy than in the 70s/80s?  Perhaps Summers is the one that is "insulated" from reality?  Is it possible that he's completely missed the fact that one of our presidential candidates is currently under multiple investigations by the FBI for various allegations of corruption and fraud?  Meanwhile, both presidential candidates are polling at among the lowest rates ever experienced for "trustworthiness" while the job approval rating of Congress has never been lower...but sure, we should grant them even more power to wreak havoc on the U.S. economy for political gain...why not?

Central bank independence “comes from an understanding of the macroeconomic policy problem that is not relevant to current times,” Summers said in a speech at the International Monetary Fund.

 

Central bank insulation was needed in the 1970s and 1980s to combat inflation, Summers said. That’s because the White House and Congress sometimes saw the short-run benefits of unexpected inflation, while the Fed kept its eyes on the long-run costs, he said.

 

But that was yesterday’s problem, Summers said. The economy now faces secular stagnation, or a chronic lack of demand.

 

To fight this, the Treasury should be issuing bonds with long maturities taking advantage of current ultra-low interest rates, Summers said. And the Fed should try not get in the way.

Summers

 

Apparently Summers is under the impression that inflation will never again be an issue in the United States and therefore sees little harm in granting politicians the keys to the financial market rigging machine known as the Fed.

In the immediate aftermath of the financial crisis, the Treasury and the Fed often worked at cross purposes. he said. While government spending was rising and the Treasury was selling debt, the Fed was moving in the opposite direction, buying bonds though quantitative easing program for the purpose of shortening the maturity structure to provide stimulus.

 

In the future, Summers said the two agencies should cooperate to make sure the full benefits of the stimulus reach the economy.

 

Summers said he was aware that market experts would be leery of such cooperation between the fiscal authority and the central bank out of a concern that inflation may jump.

 

“I regard that as a virtue, rather than a vice, of the suggestion that I am making in our current environment,” the former Treasury secretary said.

Of course, the White House and it's political appointees would never try to exploit their power for political gain, right?

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Bill of Rights's picture

Summers is a big part of our problems in this Country, fuck him as well.

bob_stl's picture

Well, they're not independent so it's business as usual.

evoila's picture

chronic lack of demand? so which is it, is overpopulation good or bad? I can't figure these reptilians out.

strannick's picture

The Fed is not ''Independent''. Its a private bank, beholden to its shareholders.

How about Congress demand the Fed reveal who are the shareholders of America's private Central Bank?

 

jcaz's picture

Fuck you, Larry- the Fed hasn't been independent for 30 years-  nice try at sucking up, tho......

Wow- issue longer bonds at lower rates?  What fucking econ classes did you take, asshole?

Idiot.

Notveryamused's picture

Semi-related. Trump's independent support has dropped from 46 to 41 over the last three days according to IBD poll. Trump needs to drop his preferred Treasury Secretary (ex Goldman & Soros) FAST.

Holy hand grenade of Antioch's picture
Holy hand grenade of Antioch (not verified) Notveryamused Nov 4, 2016 3:41 PM

Can't I ever, in my life, go 6 straight hours without some fucking jew, media captured 'know it all' trying to convince me that it's in my best interests to take a small step #FOARWARD, and put my foot upon the escalator towards the JEW WORLD ORDER?

Jim Sampson's picture

Jesus Fucking Christ!  Can't save your ass now Larry!  WE KNOW ABOUT YOU!!!

BennyBoy's picture

 

 Larry's the dimest bulb in the financial light fixture.

DavidC's picture

I think you mean dimmest, but I certainly agree - he looks like someone whose eyes are open but whose brain is asleep.

DavidC

weburke's picture

SO MANY IDIOTS, YOU DONT WANT US TO LOSE RESERVE CURRENCY STATUS.  DEBT IS NOT A PROBLEM, BUT A MUST, FOR THE CURRENCY THAT IS THE RESERVE.

HowdyDoody's picture

If they like their Fed, they can keep their Fed. Except we will revoke its monopoly over printing fiat for a fee. Let them earn their profit like ordinary people.

 

chunga's picture

We should have listened to Brooksley Born.

Creative_Destruct's picture

Exactly. Born wanted to Put CDSs and other derivitives on exchanges with margin requirements, clearing functions, and mark-to-market discipline which would have made a significant difference. It would have derailed the super-leveraging of mortgage securitization by the Shadow Banking System. The Shadow system was effectively allowed to come  about by the lack of this discipline.

Summers, Rubin & Greenspan (and WJC) effectively told Born to f-off, because the banks were "incentivized"to protect and discipline themselves. Idiots. The banks were incentivized to pump up their profits by the extreme leveraging that was allowed.

Summers is an arrogant jackass POS that no one should listen to.

Uzda Farce's picture
Uzda Farce (not verified) Creative_Destruct Nov 5, 2016 4:38 PM

Summers, Rubin, Greenspan and Clinton are members of the Rockefeller/CFR. Rubin is the current chairman. Also: Jacob Lew, Janet Yellen, Lloyd Blankfein, Laurence Fink, and George Soros. See member lists at cfr dot org.

Creative_Destruct's picture

Summers is insane. What else is new?

Evil Peanut's picture

What he's trying to say is they've milked the system dry and that we can have our money system back now because well there's nothing left of it

adanata's picture

 

 

 

These three charts represent the most recent list of shareholders and directors I can find and is from 1976. However, it has been mostly the same families for over 100 years.

Rothschild, Morgan, Rockefeller, Carnegie... all their friends and relatives. Of course these are the same owners of all the global central banks and those big boyz on Wall Street too although they try their best to cover their trail.

bania's picture

Hey, I think Larry lost some weight.

willwork4food's picture

You mean larry has some weight-in the war on Central Banks currently going on globably. This is just one more cog to cement the end of Central banks and install them in Basil over a global economic super power system. Managed, of course, by top central bankers.

pods's picture

This kike needs to eat some lead.  

Why is it these fucks always operate without fearing for their lives?

Normal people would at least think about how the rules they want to force upon the rest of us might lead them to getting their necks stretched.

Not this puke.  Someone needs to show him exactly what happens to those who wish to meddle in the daily wages of the people.

Hang this fuck.

pods

WillyGroper's picture

@pods,

not quite understanding that first and last sentence.

a bit nebulous.  could you explain that a bit better?

;)

Robert Steele asks: why haven't the rotshields been assassinated yet?

 

Rusty Shorts's picture

According to Kare Hudes, the Feral Reserve is on the way out. (may have to rewind video to beginning)

 

https://www.youtube.com/watch?v=QNBCXKI10qQ

Kayman's picture

The Fed is independent?  Larry's new job as a comedian.

Pickleton's picture

I just cant figure out how the imbecile left still believes that "they switched" lie about Democrats and Republicans.  Progressives are the epitome of fucking fascists, which every other second of the day, the mouth breathers insist is right-wing.

 

 

 

 

 

putaipan's picture

well, he mighta said it that way but what he reaally means is "end the inependenant republic"

InsaneBane's picture

Summers forgets there is a bill that needs to be payed, ropes coming

silver surfer's picture

Yea Fuck Summers, his one of the reasons both gold and intrest rates are manipulated.

MFL5591's picture

After they fucked everything up Larry?

East Indian's picture

Now that the "independent" central bankers have thoroughly screwed up the global economy, Mr Summers wants to share the blame with politicians. 

Handful of Dust's picture

Is this from The Onion?

The Fed was never "independent."

tikinoa's picture

How 'bout we just burn it to the ground instead?

buzzsaw99's picture

the fed shouldn't even exist.

Nunya Bidness Gogl's picture

Congress has the power to coin money.

Not print paper money.

And not delegate this important task to an independent, private corporation.

Not that we have been following the Constitution for some time...

Nightjar's picture

When the bill is due, suddenly we socialize the losses? bahaha

Umh's picture

Losses? I do not recall the FED lossing any assets. Not their own assets anyway.

1980XLS's picture

"Snakes on a Plane"

https://dollarvigilante.com/blog/2016/04/12/janet-yellen-meets-obama-eme...

"Independence" Day comes Tues.

 

Go Trump!

curbyourrisk's picture

Larry Summers a/k/a Senor Douchenozzle

Bill of Rights's picture

Scum bag Larry knows he is unemployed come January....

jmack's picture

someone has been doing a very orderly, very consistent liquidation (accumulation of shorts) that is apparent in /NQ price action the past two afternoons.  very orderly tight trending channels to the downside, that I have not seen, except on the long side, in futures markets for at least 2 years.

Bubbette's picture

Whatever happened to Dr. Paul's effort to audit the Fed?  It needs to have a stake driven into its heart if it has one.  There is a large black statue outside the B of A in San Francisco which is entitled the "Bankers Heart". 

Aussiekiwi's picture

'But that was yesterday’s problem, Summers said. The economy now faces secular stagnation, or a chronic lack of demand'

Really, and just how does he think we have reached this situation?

darteaus's picture

"Fed Independence" - that's funny right there.

Miss Expectations's picture

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https://www.wikileaks.org/podesta-emails/emailid/10052#searchresult

WillyGroper's picture

"The Pew Charitable Trusts"

bit confused on this one:  "Jon Leibowitz"

chairman of FTC or the court jester?

1777's picture

Please! Just stop it!

These assclowns can't even arrest Anthony Weiner

End the Fed HAHAHA.....