So much for the Federal Reserve being an independent institution free of politics. Wait. That’s what it is, right? That’s what the occupants inside the Eccles Building, the Fourth Estate propagandists, and central banking champions regurgitate to the public. We have been led to believe the myth that the creature from Jekyll Island’s only mandates are to maximize employment, stabilize prices, and moderate long-term interest rates.
But Fed Bank of Minneapolis President Neel Kashkari, who keeps parroting the fallacy that the central bank is a politics-free zone, believes now is the time that the monetary leviathan adds another objective to its policy manual: Redistribute the wealth, baby. Isn’t this the work of those esteemed representatives on Capitol Hill and not the Federal Open Market Committee?
Kash Me Ousside
For the last century, the Fed has ensured that Swamp monsters are given first dibs on freshly printed dollars before anyone else. From the flappers of the 1920s to the cool cats of the 1960s to the soccer moms of the 2000s, the peasants eventually receive crumbs as these Federal Reserve Notes travel their way through the economic system. The addicts on Wall Street get their easy money fix, while Main Street residents are left with vestiges of sound money.
Is it time to reverse this policy tradition? Kashkari, an outspoken dove, contends that monetary policy can be an instrumental redistributive force. This is still a minority view inside the central bank, but as Bloomberg notes: “Kashkari has helped lay the groundwork for a shift in Fed communication this year.”
“We had historically said: distributional outcomes, monetary policy has no role to play. That was kind of the standard view at the Fed, and I came in assuming that. I now think that’s wrong,” he told the business news network last month.
Put simply, instead of directing monetary policy to benefit the affluent, Kashkari proposes churning out fresh batches of U.S. dollars to help the impecunious. The suggestion is like what former European Central Bank (ECB) President Mario Draghi stated prior to leaving the Frankfurt-based institution. Although he conceded that it is under the purview of lawmakers, the ex-ECB chief recommended “putting money directly in the hands of public and private sector spenders.”
What this really means and how it would look in reality is difficult to ascertain. In an attempt to appear relevant in an age when progressive politicians argue in favor of Modern Monetary Theory (MMT) –turning the printing press over to Congress – the Fed might be the latest participant in the Woke Olympics. Since fighting income inequality is a vague ambition, the central bank could tailor monetary policy to the objectives of the Green New Deal (GND), facilitate the introduction of a universal basic income, or provide cover for any other cause du jour emanating from the minds of the Squad.
Unfortunately, we know the Fed could ignite an official merger of monetary and fiscal policy that directly monetizes the national debt and federal deficits. This would be one of the most dangerous fusions in United States history because it extends an unelected, omnipotent, and secretive entity that is accountable to no one the ability to issue unlimited amounts of debt to politicians – left and right.
Of course, the Fed may not call it MMT, just like it will not call its relaunch of quantitative easing … quantitative easing. Interestingly enough, instituting such a system would contradict a recent Fed Bank of New York paper that warned adopting the not-so-modern MMT would lead to “economic ruin” for the country. It often seems like the left hand has not seen its right hand in years over there.
I Am Big …
“There once was a time in this business when I had the eyes of the whole world! But that wasn’t good enough for them, oh no! They had to have the ears of the whole world too. So they opened their big mouths and out came talk. Talk! TALK!”
That piece of dialogue from Sunset Boulevard could have emanated from the mouths of anyone in the central banking system – the Fed, the ECB, the People’s Bank of China, or the Bank of England. In a desperate maneuver to stay relevant, these institutions are clamoring for the attentions of leftist Bobby-soxers by spouting vacuous platitudes. Former Fed President Bill Dudley wants the institution to harm President Donald Trump’s re-election campaign, Fed President in NY John Williams says the Fed should do more for the LGBTQ community, and now Kashkari posits the need for wealth redistribution.
Perhaps one day, a Fed chair will say, “I am big. It’s the printing presses that got small.”