Should the Federal Reserve............................?

Question

......remain independent of the President and Congress or should monetary policy be controlled by the President and Congress? Why?

Answer 1

Remain independent - you need the long term stability, and not changing every time a different government comes in.

Also, politicians tend to promise the sky to get elected, and cater to interest groups. Arbitrary decisions that don't help keep economies stabilized.

Answer 2

Research (by Gujarati and others) has found that an independent Central Bank (ie the Fed) has more effect than a centrally-controlled Central Bank.

The explanation is that markets react to Central Bank policy, and tend to believe an independent entity (since they can take moves that tick off the majority of the populace and remain intact) while Congress would shy away from it, even when it is best for the economy as a whole.

Moreover, the Central Bank acting independently can react more rapidly (ie, they meet every 6 weeks and make the call) while debate over whether to raise or lower target interest rates could rage long past the point that such policy would be effective.

Finally, Congress and the President lack the insight and understanding to really implement effective monetary policy. Read Friedman's 1971 address to the American Economic Association.

Answer 3

Independent. Not hard to guess what would happen if monetary policy was at the whim of the elected officials. They'd always lower interest rates and pump up the money supply to try to stimulate the economy, and would not have the discipline to tighten things when inflation breaks out and spirals towards hyperinflation.

Answer 4

Absolutely not. They are independent of Congressional audit. Look into sen. Louis McFadden from the 30'2, he has a great explanation of the what the fed is really up to. It is basically charging us interest on money that is free to create, that we are more than capable of producing ourselves. It is in the interest of european bankers. Total scam

Answer 5

Should always be separate! Unless we want to live in a communist or fascist country.