David R. Henderson  

Joe Salerno on Central Bankers

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Central bankers are politicians with tenure.

This was economist Joe Salerno's response to Stuart Varney's claim that giving Congress more control over the Federal Reserve would put politicians in charge of monetary policy. (It's at about the 4:09 point.)

I've always had a soft spot in my heart for Joe, ever since meeting him at the second Austrian economics conference in Hartford, Connecticut. I still remember when he was presenting a paper and Hayek, who was present, had something to say about it. Hayek bolted quickly to the podium and Salerno, sensing that he should let the recently crowned Nobel prize winner intercede, stepped back. Joe was obviously caught by surprise and so when he stepped back, he saluted. It was a sweet moment and the audience laughed with delight.

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COMMENTS (6 to date)
Eric H writes:

The idea of congress determining monetary policy is just about as revolting to me as central bankers determining monetary policy!

wm13 writes:

Central bankers are politicians with an education in economics and the support of the banking sector. I'll take them over Ron Paul or Barney Frank any day.

Vladimir writes:

wm13, all else being equal, do you prefer (non-central bank) politicians who have the support of the banking sector? Whatever the description means, let's assume the banking sector supported Paulson as treasury secretary. Does that alter your evaluation of TARP? How so?

Joe Cushing writes:

I would like to see that saluting video

wm13 writes:

"all else being equal do you prefer (non-central bank) politicians who have the support of the banking sector?"

Yes. Bankers generally support sound money, enforcement of contracts as written, and low taxes, and I support all those things. (Even though I'm not a banker.)

And mostly, I think TARP was a good idea and has worked out well, except for the part that was diverted to the auto companies at the behest of the labor unions, who generally support unsound economic policies tending toward economic stagnation.

Ryan Vann writes:

Overall, I have to agree with WM here. I rather that there be no central bank at all, but wishes and reality aren't the same. In that respect, I'd definitely prefer banking have some insulation from politics (granted it is foolish to assume complete autonomy). Likewise, I do trust the average employee at the FED is more capable than your average senator when it comes to banking decisions.

I also don't have too many major gripes with TARP. The biggest issues are that it might have created some zombie corporations, and the credit line could be used as a pretense for all sorts of interjections. Overall, it will likely pay for itself (which means no tax hikes). WM mentioned one of the aspects that I don't believe will pay off, which is the diversion of funds to auto companies.

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