U.S. Representative Kevin Brady, Republican of Texas and chairman of the Joint Economic Committee penned an op-ed for The Wall Street Journal asking readers to take their eyes off of the distraction over who should be the next chairman and focus on the future of monetary policy and the Federal Reserve itself.
And then he blew it; he blew it with the word to often aligned with kicking the can the road: commission. Fortunately he spared us the “blue ribbon” phrase that usually accompanies “commission” and stuck us with “12-member by partisan” instead, aptly describing its makeup if not aptly describing why we need one in the first place.
A commission that does the job of Congress is not the effective way of getting at a problem. The problem, described by Mr. Brady, is the Federal Reserve’s performance on metrics such as output, employment, prices, and financial stability. The new commission would study this data and determine if the Fed is doing its job.
The problem with the Federal Reserve is not its performance over the last 100 years, but that by its very existence it has skewed market signals, taken away the clarity financial players in the markets need in order to set capital flowing where it needs to.
Instead let the markets respond to good ole bidding among themselves for funds. The bids received and sent will give markets a more accurate sense what prices for funds are. Independent agencies setting floors for prices may make traders happy but not too many other people.
As for employment, I’m sorry, but that is not happening until derived demand for labor continues to pick up. This is in part a global problem where producers may have to try and open up other markets outside the U.S. in order to increase demand and output for products produced here. Increased output along with increases in entrepreneurship will drive the creation of jobs that the Federal Reserve has to see before tapering down its QE3 program.
All this Federal Reserve has provided is an excuse for Congress to shirk its responsibilities for regulating commerce. Finding a way to energize the excuse is not good for the economy.