Four Things Occupy Wall Street Should Know About the Federal Reserve
Continued from previous page
These goals dovetail nicely with Occupy Wall Street. As Chris Hayes wrote in a prescient 2009 policy paper on the need for higher inflation, “the central tug of war over inflation is between creditors and debtors: inflation is good for debtors and bad for creditors.” The people who are hit hardest by mild inflation are the rich, who own most financial securities, and the banks, who want to keep squeezing as much from their debtors as possible. It would also be significantly simpler to achieve debt relief through inflation, and far more likely to be enacted than the “ jubilee” policy associated with OWS. (Nothing like that is going to get through a House of Representatives controlled by this guy.)
4. Don’t End the Fed, Make it Accountable to the Needs of the 99 Percent
The Federal Reserve needs a wakeup call. Perhaps an Occupy Wall Street-shaped wakeup call. Instead of waving nonsensical “End the Fed” signs and aping the talking points of a reactionary Republican, occupiers should demand that the Fed be made more democratically accountable and that policymakers seriously execute its dual mandate to maintain stable prices and full employment.
One significant step toward these goals would be the democratizing of the Fed’s Open Market Committee (OPM), which controls interest rates, the nation’s money supply—the monetary policy side of the institution. There are 12 seats on the OPM: one for the Fed chairman, one for the vice-chairman, and five for the other Fed governors selected by the president and approved by Congress. Then there is the president of the New York Fed and a rotating cast of four of the 11 other regional Federal Reserves. Regional fed presidents are appointed, in large part, by representatives of the banking industry who want to keep inflation low to preserve the value of the debt it holds. True to form, many of the most reactionary voices on the OPM are regional Fed presidents.
Barney Frank is working on legislation to remove the regional Fed presidents from the OPM and replace them with presidential appointees who would be more democratically accountable. “It’s like having Merck and Pfizer appointing people to the FDA,” Baker says. “I can’t think of any other industry where you directly give the regulated industry a voice in its regulator.”
Part of the reason the Fed has been so subdued in its pursuit of monetary stimulus is that the right has been so fierce in fighting against it. (Remember when Rick Perry called Bernanke’s policies “ almost treasonous”?) It is long past time that the left started taking an interest in the Federal Reserve and pushing for monetary stimulus to ease unemployment and the debt burden. Ignore the siren song of Ron Paul and other “End the Fed” types. Occupy Wall Street should fight to ensure that the Federal Reserve works for the many, not the few.
Jake Blumgart is a researcher for the Cry Wolf Project and a freelance journalist based in Philadelphia.