The Illusion of Independence

http://www.futureofcapitalism.com/2011/03/the-illusion-of-independence

From a Washington Post editorial published Friday (link via Economic Policies for the 21st Century):

Congress could stop asking Mr. Bernanke to referee its disputes on fiscal policy and other matters about which he obviously should not comment publicly. No more games of gotcha about tax increases or spending cuts; no more loaded questions about dealing with China. In short, give the man a break. Yes, members of Congress have a legitimate interest in probing Mr. Bernanke about matters within the Fed's purview. But the public as a whole has a stronger interest in preserving the Fed's political independence, both actual and perceived.

This distinction drawn between "actual" independence and "perceived" independence is an intriguing one. It's almost as if the Post is advocating that the public should be left laboring under a false impression the Fed is more independent than it actually is. Otherwise, why bother with the difference between actual and perceived independence?

Similarly intriguing is the suggestion that there are matters about which Mr. Bernanke should not comment "publicly." Would it be okay for him to comment on these matters privately, so long as word doesn't seep out to the public enough to damage the all-valuable public perception of Fed independence?

by Ira Stoll  |  Mar 7, 2011 at 11:47 am Related Topics:  Federal Reserve receive the latest by email: subscribe to the free futureofcapitalism.com mailing list