Yesterday the “Chef” of the Fed, Ben Bernanke, published another highly informative piece about the state of money flow, liquidity, fear of inflation and general insights how he handled and is still handling the current economic crisis. It will be interesting to see if Obama will try to use the Fed to pay for his HealthCare idea and other US government expenditures. Ben Bernanke is still resisting this push as he is also resiting the push of some Senators to audit the Fed.
The Congress, however, purposefully–and for good reason–excluded from the scope of potential GAO reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. In doing so, the Congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy. Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. A perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability. We will continue to work with the Congress to provide the information it needs to oversee our activities effectively, yet in a way that does not compromise monetary policy independence.
From my point of view, Ben Bernanke is a very fine man doing a very fine job.
he told the Senate Banking Committee. “The American consumer is not going to be the source of a global boom by any means.”