Archive for monetary policy

The Media, the S&L Crisis, and the 2008 Financial Crisis

081008_s_wilmsen_silveradoGoing to journalism school does nothing to prepare journalists to write on economics and finance, and not surprisingly, it is exceptionally difficult to find people who are both excellent writers and knowledgeable about economics. Henry Hazlitt is of course a notable exception (he never went to college) as is James Grant. (Grant, by the way has a new book due out later this year on the Depression of 1921.)

In today’s Mises Daily, Dale Steinreich mentions how one of the main obstacles to understanding the S&L crisis is the fact that most of the people in the media who worked on the issue were incapable of understanding the problem as anything more than a failure to regulate (read: government regulation) the economy properly. In the minds of people with no significant economics training or knowledge (i.e., most journalists) economies can be made to do whatever people want them to do, simply by issuing government edicts. So, if more mortgages should be granted in low income neighborhoods, the government shall simply issue a command that it shall be so. What could go wrong? If something does go wrong it is because people didn’t follow the regulations or because government agents weren’t vigilant enough.

Speak to most journalists (especially ones who like to cover political beats) about the problem of economic calculation or the role of the price system, and you’ll receive a blank stare. (I’ll be the first to admit that there are lots of smart local business reporters out there who are actually interested in this sort of thing, though.)

Nonetheless, a perfect illustration of this blind spot for the complexities of markets and economics is a little book about the Silverado Savings and Loan called Silverado: Neil Bush and the Savings and Loan Scandal. Remember Silverado Savings and Loan? It was notable for two reasons: when it went under, about $1 billion disappeared. Back then, that was a lot of money, and it marked Silverado one of the biggest S&Ls to collapse. The other reason Silverado made headlines was Neil Bush was a member of the board.

The book Silverado is by a person named Steven Wilmsen who now works the metro beat at the Boston Globe, working on local personal interest stories about murders and immigrants, which tells you something about  how interested he is in the financial system. The title of the book implies it is largely about Neil Bush, and if that were the case, it would likely be a very boring book. Fortunately, however, the mention of Bush in the title is really just an attempt to make the book marketable to a larger audience.  The book is really a rather interesting case study about a large Savings and Loan in the 1980s, and its rise and fall. As a record of numerous relevant events about S&Ls in general and that S&L in particular, and as a little snapshot on the regional economy in the Western US during the 80s, it’s quite well done.

Where the book fails badly is in its attempt to explain to the reader the causes of the S&L crisis and the industry’s role in the larger economy. Monetary policy, if it is mentioned at all, certainly occupies no significant place in this book at all, nor does the interaction between the political system and interest rates. Steinreich’s article today covers a lot of this ground, but you wouldn’t know anything about it at all from reading Wilmsen’s book.

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How to Start Reforming the Federal Reserve Right Now

6817Mises Daily Wednesday by Brendan Brown:

All too many of the reforms being proposed for the central bank are just more of the same central planning. Real reform of the Fed begins with setting interest rates free, the abolition of deposit insurance, and ending the Fed’s position as lender of last resort.

Less Fed Financial Repression Irrational?

220px-Marriner_S._Eccles_Federal_Reserve_Board_BuildingIn a recent Bloomberg Views piece, mainstream economist Noah Smith accused his Austrian  critics of having “brain worms” and even “anti-semitic overtones.” He then mischaracterized what his critics were saying so that he could ridicule it.

This wasn’t very conducive to a dialogue. His last Bloomberg piece, out on July 10, is better. It offers a specific proposal: don’t raise today’s ultra low interest rates.  Unfortunately it doesn’t say whether this advice is forever, or for now. But it is a specific proposal.

This is all the more helpful because it is difficult to tease specific proposals out of mainstream ( usually Keynesian) economists. For example, during and after the Crash the best known Keynesian economists ( Krugman, Shiller, Romer, Yellen etc.) kept saying we needed more government stimulus of the economy, but refused to give us the exact prescription.

This was very convenient when the stimulus failed; they could just claim that there hadn’t been enough. Never mind that they had refused to tell us in the first place how much was needed or for how long.

In his latest piece, Noah Smith not only says that short term interest rates should stay where they are, close to zero, and well below even reported inflation. He further argues that these giveaway interest rates ( made available to Wall Street, not to Main Street) are not creating a stock market or other asset bubble like the dot com or housing bubbles.

Smith then gives us what he calls Finance 101. Here is what he says: “The value of a financial asset is the discounted present value of its future payoffs, and when the discount rate — of which the Fed interest rate is a component — goes down, the true fundamental value of risky assets goes up mechanically and automatically. That’s rational price appreciation, not a bubble.”

Let’s see. The Fed artificially represses interest rates for now, with no guarantee that they won’t go bounding back up anytime in the future, even the near future, but stocks should be valued as if the artificially repressed rates are permanent. Sorry, this isn’t “rational” and it certainly isn’t Finance 101.

Smith further notes that “bubbles form when people think they can find some greater fool to sell to.” Hm. Why do people expect to find “greater fools” at some times and not other times?

George W. Bush famously said that “Wall Street got drunk” before the 2008 crash. But where did the cheap alcohol come from, if not from the rivers of new cash created by the Fed and delivered to the bars in Manhattan and around the world?

Even Smith admits that “there’s laboratory evidence for bubbles, too — it’s by far the most-researched phenomenon in experimental finance. And it’s true that when you give traders in the lab more cash, you get more and bigger bubbles.” Exactly. More cash, cheap cash, and the promise of bail-outs. It’s a deadly combination.

Smith even argues against his position when he thinks he is arguing for it. He says that “the Fed has been regulating the monetary base for many decades, and for a lot of that time there were no big bubbles.” Right again. The Fed isn’t operating as it did in the pre-Greenspan era. Far from following a “cautious, middle-of-the-road policy, It has embraced radical and recklessly untested new methods of money creation and interest rate repression that would have horrified earlier Fed boards and chairmen.

The main thrust of Smith’s piece is that interest rates should not be raised. For reasons he does not give, repressing interest rates and driving up stock prices are entirely rational while increasing rates is “irrational.” Rate reductions are wise policy; rate increases are a “blunt hammer.“

This echoes Keynes’s argument in the General Theory that the way to create a boom is to lower interest rates and the way to keep it going is to lower them further. Unfortunately history reveals that this doesn’t work; it just feeds bubbles. And even Keynes did not argue for forcing interest rates below inflation.

Smith has at least a glimpse of what his critics find troubling. He asks: “ what good is a crash to prevent a crash?,” but acknowledges that the critics have a “mental model …[of]… a little pain now to prevent a lot of pain later.” That’s it. They don’t want a crash at all; but they certainly don’t want an even bigger crash than the last one in 2008.

Smith rejoinder is curious: “If the rise in prices has been a rational response to Fed easing, then there’s no need for such medicine; causing a crash today will just cause a crash today, period.” But, as we have already noted, this only makes sense if the Fed will hold rates down forever and never bring them back up.

If the Fed will at some point bring them back up or perhaps even lose control of them, there will have to an adjustment. The only question is whether it would be healthier to have it now, or later, after even more new money has flooded the economy and created even more mal-investment and unrepayable debts.

Solving these problems for the long run requires abolishing the Fed  and restoring honest money and banking practices. But, for now, maintaining giveaway rates for favored special interests just makes everything worse.

Fiat Money: ‘A Large-Scale Fraud System’

Euro_coins_and_banknotesThe Center for Financial Studies in Frankfurt reports on a recent talk given by Thorsten Polleit:  

Thorsten Polleit on the “planned chaos” of money

What are the reasons for economic booms and busts and which reforms are necessary to create an economically viable monetary order? On 2 April, Thorsten Polleit addressed these questions in his lecture “Boom & Bust, or: Planned Chaos” referring to the Austrian school of economics. Polleit is Chief Economist of Degussa Goldhandel, President of the Ludwig von Mises Institut Deutschland and Honorary Professor at the Frankfurt School of Finance & Management.

Polleit identified the state-controlled fiat money system as a main cause of the international financial and economic crisis. This system, he said, is based on the ability of banks to create money literally out of nothing. It is, in principle, a “large-scale fraud system” because today’s money is “intrinsically worthless and not redeemable”. This has damaging consequences for the overall economic development.

Circulation credit reason for economic fluctuations

To prove this fundamental critique, Polleit referred to the theoretical principles of the Austrian School of Economics, in particular to Ludwig von Mises. According to Mises, the circulation credit is the cause of economic fluctuations. Circulation credit means that banks lend money, and thereby expand money supply, without backing them by real savings (or reduction of consumption). This circulation credit is creation of money “ex nihilo”. Booms as well as busts are damaging because they slow down long-term investments with the consequence that resources in fluctuating economies are lacking. According to Mises, the problem is not low consumption but low savings. This means that the countercyclical policy in the manner of Keynes is based on a wrong diagnosis. This policy prevents an early market-driven correction with the result of an even bigger bust.

Fiat money system creates failures

Polleit explained, on the basis of the interest theory of Mises, that the market interest rate in a fiat money system was chronically below the natural interest rate. The consequence of adherence to such a system with its too low interest rates is that economic and political mistakes during the bust phase are not completely corrected – and, thus, new failures will arise. One current example for the failure of the low interest rate policy in the industrial countries is the flow of foreign capital into the emerging markets with all its harming effects. Especially since the US Federal Reserve has announced to reduce bond purchases, many investors have withdrawn their money from the emerging markets. As a result, the exchange rates of the emerging market currencies strongly depreciated – with negative consequences for their previously booming economies.

This destabilization in emerging markets will, according to Polleit, result in an even closer cooperation among national central banks – with the objective to counteract the remaining currency competition. Central banks of emerging economies could be forced to join the network of liquidity-swap-agreements in order to receive credits from other central banks more easily. Thereby, they would basically give up their sovereignty over the national money supply. The result would be a world cartel of central banks led by the US Fed. This cartel would extend the boom phases, which are caused by the credit money system, and, as a consequence, amplify the inevitably following busts.

Against the background of this grim scenario, Polleit demanded a reform of the monetary system towards a market-oriented monetary order. This should include, inter alia, disempowering central banks and privatizing money supply.

Jeff Deist Explains How The Fed Distorts Everything

Jeff Deist discusses how the Fed creates a perilous landscape in which there is no honest pricing—everything has been distorted—even at the consumer level.

The European Central Bank’s House of Cards

6777Mises Daily Wednesday by Frank Hollenbeck:

The European Central Bank’s recent move to negative interest rates is a sign that the ECB is hitting the panic button.

Mises Daily: The Fed Won’t Let the Economy Heal

6773Mises Daily Friday:

Contrary to popular thinking, an economic cleansing is a must to “fix” the mess caused by the Fed’s loose policies. To prevent future economic pain, what is required is the closure of all the Fed’s means of creating money out of “thin air.”


‘The Era Of Negative Interest Rates Has Begun’

126px-European_central_bank_euro_frankfurt_germanyTo battle the evils of deflation and dis-inflation, the European central bank is blazing new trails:

According to CNBC:

The European Central Bank (ECB) took the unprecedented step Thursday by imposing a negative interest rate on banks for their deposits—in effect charging lenders to park money with it.

The move was part of a series of measures to combat the euro zone’s growth-sapping disinflation and give a push to its stuttering economic recovery.

Business Insider announced ‘The Era Of Negative Interest Rates Has Begun’ and noted:

Specifically, the ECB cut the deposit rate to -0.1%, from 0.0%, effective June 11.

This is a historic development, as it’s the first time a major central bank has cut any main interest rate to negative in a bid to spur lending and spending.

The idea is that if banks aren’t being rewarded with a good deposit rate by parking their reserves at the central bank, then they will be more likely to lend it to households and businesses.

This development, while perhaps something new in a de jure kind of way, is really not a significant change in the de facto status quo in which central banks, most notably the ECB and the Fed, are continually seeking to jumpstart economies by inflating the money supply. Of course, they’ve been trying to jumpstart things for nearly six years, but surely this latest move will work like a charm.

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Why Central Bank Stimulus Cannot Bring Economic Recovery

6770Patrick Barron writes in today’s Mises Daily

The governments and central banks of the world are engaged in a futile effort to stimulate economic recovery through an expansion of fiat money credit. They will fail due to their ignorance or purposeful blindness to Say’s Law that tells us that money is the agent for exchanging goods that must already exist. New fiat money cannot conjure goods out of thin air, the way central banks conjure money out of thin air.

Speaking Truth to Monetary Power

6760Lew Rockwell writes in today’s Mises Daily:

We do not need “monetary policy” any more than we need a paintbrush policy, a baseball bat policy, or an automobile policy. We do not need a monopoly institution to create money for us. Money, like any good, is better produced on the market within the nexus of economic calculation. Money creation by government or its privileged central bank yields us business cycles, monetary debasement, and an increase in the power of government. It is desirable from neither an economic nor a libertarian standpoint. If we are going to utter monetary truths, this one is the most central and subversive of all.

Echoes of 1937 in the Current Economic Cycle

6756Brendan Brown writes in today’s Mises Daily

It is not too early to ask how the present US business cycle expansion, already more than five years old, will end. The history of the last great US monetary experiment in “quantitative easing” (QE) from 1934-7 suggests that the end could be violent. Autumn 1937 featured one of the largest New York stock market crashes ever accompanied by the descent of the US economy into the notorious Roosevelt Recession.

Audio: Mark Thornton Explains Easy Money Policy

Mark Thornton discusses Martin Wolf’s support for continued easy money policy, and also the latest push by the central bankers and their friends in the media to try to convince us that rising prices are good for us.

Yellen to End QE Someday, Maybe

126px-US-FederalReserveSystem-Seal.svgJanet Yellen spoke to lawmakers today. After making it very, very clear that bad weather is the cause of the lackluster economy,  Yellen then went on to confirm that the Fed will wind down quantitative easing (specifically, the bond-buying stimulus program) seven months from now if ”the labor market continues to improve and inflation remains low.”

Yellen is clear that if the Fed concludes that things are just right somewhere down the line, the Fed may or may not reduce bond-buying to zero. Even then, however, the Fed’s commitment to low interest rates remains in force indefinitely, we’re told.

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Europe and Deflation Paranoia

European Central Bank in frankfurt.Frank Hollenbeck writes in today’s Mises Daily:

There is a current incessant flow of articles warning us of the certain economic calamity ifdeflation is allowed to show its nose for even the briefest period of time. This ogre of deflation, we are told, must be defeated with the printing presses at all costs. Of course, the real objective of this fear mongering is to enable continued government theft through debasement. Every dollar printed is a government tax on cash balances.

There are two main sources of deflation

Audio: Joseph Salerno Talks Monetary Chaos

downloadInterviewed by host Tom Woods, Joe Salerno talks about the Fed, the Great Depression, currency wars, deflation, and why governments hate cash.


Fed Liquidity and the World Economy

404px-Currency_Exchange.svgNoah, commenting on “For More Jobs and Stability, Set the Economy Free”, points to second  important observation in the linked commentary by Kevin Warsh – the spillover effect of Fed Policy, with significantly negative long run consequences, on the world economy. From his comment:

The piece by Kevin Warsh that was linked in the article (“Finding Out Where Janet Yellen Stands”) included this important observation:

“The Fed makes domestic decisions for the domestic economy. Yes, but the U.S. is the linchpin of an integrated global economy. Fed-induced liquidity spreads to the rest of the world through trade and banking channels, capital and investment flows, and financial-market arbitrage. Aggressive easing by the Fed can be contagious, inclining other central banks to ease as well to stay competitive. The privilege of having the dollar as the world’s reserve currency demands a broad view of global economic and financial-market developments. Otherwise, this privilege could be squandered.”

The Fed is not just picking winners and losers domestically, it is doing so globally. While the winners fill their pockets, the losers get increasingly restless and increasing aware that the screwing they are getting is not random but has a very definite source.

As is often the case, Austrian influenced economists have been on the leading edge. Those wonkish types interested  more detail first see the Fertig Prize winning article Monetary Nationalism and International Economic Stability by Andreas Hoffmann and Gunther Schnabl. The abstract:

ABSTRACT: This paper describes the international transmission of boom-and-bust cycles to small periphery economies as the outcome of excessive liquidity supply in large center economies, based on the credit cycle theories of Hayek, Mises, and Minsky. We show how too-expansionary monetary policies can cause overinvestment cycles and distortions in the economic structure on both the national and the international level. Feedback effects of crises in periphery countries on center countries trigger new rounds of monetary expansion in center countries, which bring about new credit booms and international distortions. Crisis and contagion in globalized goods and financial markets indicate the limits of purely national monetary policies in countries, which provide the asymmetric world monetary system with an international currency. This makes the case for a monetary policy in large countries that takes responsibility for its long-term effects on goods and financial markets in both the center and the periphery countries of the world monetary system.

Other good work on the topic is by Metro State’s Nicolas Cachanosky:

The effects of US monetary policy on Colombia and Panama (2002-2007)


  • Studies international      effects on two small economies with different forex regimes.
  • Studies how these two      economies react to US monetary policy.
  • Relative capital      intensive sectors are more sensitive to US monetary policy.
  • This common      characteristic can explain business cycle co-movements.


U. S. Monetary Policy’s Impact on Latin America’s Structure of Production (1960-2010)” which extends ABCT and capital-based macroeconomics in the international arena, especially as it applies to the ‘periphery’.

The abstract:

I study the effects of U.S. monetary policy on Latin America’s structure of production prior to two recent economic crises. I find that changes in the Federal Funds rate produced uneven effects across economic sectors. Those industries that are more capital intensive and relative long-term projects are more sensitive to changes in the Federal Funds rate than projects that are less capital intensive and relative short-term in duration. Therefore, periods of loose monetary policy resulted in a misallocation of resources that has been costly to correct during the bust. This result finds a particular pattern of economic distortion during an unsustainable boom.

Also by Andreas Hoffmann’s “Zero Interest Rate Policy and the Unintended Consequences on Emerging Markets.

The abstract:

In response to the subprime crisis and Great Recession central banks in advanced economies have cut interest rates towards zero and increased monetary accommodation to step-up domestic growth. In this paper I attempt to describe the unintended consequences of the low interest rate policies in emerging markets. I argue based on the Mises-Hayek business cycle theory that the current low interest rate policy in advanced economies may have planted the seeds for new bubbles and gave rise to interventionist cycles in emerging markets. I show that capital flows to high-yielding emerging markets translate into monetary expansion in emerging markets. In the face of buoyant capital inflows fear of floating forces emerging markets to follow the interest rate policy of advanced economies. The monetary expansion triggers mal-investment and over-borrowing. To stem against arising inflationary pressure and kill-off speculative capital inflows empirical evidence suggests that emerging market governments increasingly repress financial markets. International financial markets disintegrate. I conclude that the monetary policy of the large advanced economies is incompatible with financial integration and globalization

The Fed Is Not Following The Law

799px-Handcuffs01_2003-06-02Some of the games being played behind closed doors by the Fed are not only troubling. They are not even legal.

It was a clear violation of Section 14 (B) of the Federal Reserve Act for the Fed to respond to the Crash of 2008 by buying $1.5 trillion of mortgages not guaranteed by the federal government. The agency hid behind Section 13.3 language allowing a broad scope of action under “unusual and exigent circumstances,” but the statute states clearly that Section 13.3 loans can only be short term and backed by high quality collateral, a requirement that was blatantly ignored.

It was also a violation of both the Fed statute and the Constitution to offload potential Fed losses from its hedge fund-like operations onto the Treasury, as was done stealthily via a note to the Fed’s Statistical Release H 4.1 dated January 6, 2011. The notion of the Treasury (i.e. The taxpayers) having to bail out the Fed is not just a theoretical possibility. The Fed’s annual report just released shows a $53 billion unrealized loss.

It would also appear to be a violation of the Constitution to locate the new Consumer Financial Protection Bureau created by the Dodd-Frank Act inside the agency. The Constitution requires that all government expenditures be authorized and funded by Congress. The Fed has always been treated as an exception. It uses income on securities it has bought with newly created money to pay its bills and has not even been subject to Congressional oversight.

Having a secretive, self-funded, extra-constitutional agency inside government was bad enough when the Fed consisted of seven governors and a few staff members. The new Consumer Bureau already employs an estimated 1,359 people and keeps growing. Many of these employees were transferred from other government agencies where they formerly had been counted as part of the federal budget, but are now suddenly off-budget. If this is allowed to stand, what other federal agencies will be slipped inside the Fed in future in order to reduce the reported Federal deficit?

Some of the Fed’s actions since the Crash have been perfectly legal, but also designed to escape detection by the press and public. For example, in the dark days of the 2008 crash, a provision was buried deep in the TARP bill passed by Congress authorizing the Fed to pay interest to banks on their lending reserves. This made it legal for the Fed to print money and hand it over to the banks in unlimited amounts. One wonders how many members of Congress were aware they were passing this?

Today the Fed pays ¼ of 1 percent interest on trillions of dollars of unused bank reserves. An estimated 37% of that is paid to foreign banks. This is a grey area legally. One wonders how many members of Congress know about it.

During the Crash itself, as much as 70% of Fed discount window loans seem to have gone to foreign banks at rates as low as 0.01%. In other words, we made huge gifts to foreign banks.

If the economy gets overheated, the Fed says that it will simply increase the interest it is paying on bank reserves to ensure that those reserves aren’t turned into loans to business and consumers. But the more money that is created to pay interest on unused reserves, the bigger the unused reserves become. In typical government style, a problem will be alleviated short term only at the cost of making it worse in the future.

After reading this post, you might conclude that someone should sue the Fed over its illegal actions. Unfortunately taking the Fed to court is easier said than done. Under federal law, you must have “standing” to sue. Ordinary citizens are deemed not to have standing. Under recent court decisions, even banks do not seem to have standing, despite their being regulated by the Fed.

Fed illegality can best be addressed by Congressional action. Congress created the Fed and can reform it or even shut it down. There are critics of the Fed in Congress, but not nearly enough of them. And there are reasons why Congress mostly leaves the Fed alone.

It is the Fed that backstops federal deficit spending. Without the Fed, government could not continue indefinitely spending more than its tax revenue. So long as politicians think they benefit from the expansion of government and runaway spending, they will not want to reform the Fed.

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Mortgage Market Roulette

454px-IOF-32-REV-4Following the Fed meeting last week, I was interviewed by Thomas Ressler, editor of Inside the CFPB (Published by Inside Mortgage Finance Publications) focusing on the impact of Fed policy on MBS and the housing market.

His summary of our discussion:

More broadly speaking, Fed watcher John Cochran, emeritus professor of economics at Metropolitan State University of Denver, agreed that one of the first things that needs to happen to attract private capital back into the MBS market is for the Fed’s footprint in the space to shrink. However, given the drop-off in new issuance, the Fed’s share of the pie may actually be increasing.

It’s true that the Fed is reducing its purchases somewhat, but “the trend seems to show that they’re buying a larger and larger percentage of total new securities issued,” Cochran said. “So I’m not really certain when and how private money is going to be attracted in on a significant basis when we’re really overly dependent on these extremely low rates and holding onto, in the Fed’s balance sheet, significant portions of these MBS.”

He also shares the concern that the housing market is on the verge of another bubble because of the low interest-rate environment. “What part of a bubble don’t people understand, where they’re looking at returns to 2007, 2008 housing prices as a sign of recovery?” the professor said

In our discussion sumarized in the last paragraph I refered  Mr. Ressler to the excellent Housing Bubble 2.0 by David Stockman posted at . If you haven’t seen it is well worth a read.

Even with tapering QEIII is a large intervention is important credit markets and is still an ineffective (relative to its stated goals) and long term harmful mondustrial policy.

After being relatively stable from  September 2013 through December 2013, both the monetary base and bank excess reserves restarted their upward trend in January. Fed while slowing purchases on long end must be very active on short end again to maintain near zero interest.

The Euro Is Not Overvalued (Nor Is Any Other Currency)

Change your moneyFrank Hollenbeck writes in today’s Mises Daily: 

The Economist magazine publishes twice yearly the Big Mac Index (video) which measures the “over- or undervaluation of a currency. Of course, the price of a hamburger has more to do with the cost of labor and rent than with the cost of the bun, meat, or pickles in a Big Mac. It is also a non-traded good, so we should not expect arbitrage to force uniformity in prices across countries or regions. The Economist is trying to sell magazines, so it is justified in being less than precise. However, professional economists should not be using this index, or any index, to identify a currency as undervalued or overvalued. In reality, such statements are total nonsense.

The value of a currency, as reflected in the exchange rate, is determined by supply and demand. The price of rice is not overvalued nor is the price of apples undervalued. Such a statement would be considered idiotic for rice or apples, but is considered justified for exchange rates. Equilibrium exists where the quantity demanded is equal to the quantity supplied. No one is overpaying or underpaying. To suggest that someone is indeed “overpaying” implies the buyer is irrational.

Obama’s Latest Fed Appointments

387px-Marriner_S._Eccles_Federal_Reserve_Board_BuildingPresident Obama has named three more nominees to the Fed and the Senate has had a chance to interview them. The first and most important is Stanley Fischer, aged 70, nominee for vice chairman as well as a regular member.

The most curious thing about Fischer’s resume is that, having been born in Zambia, and naturalized as an American in 1976, he accepted Israeli citizenship in 2005 in order to become head of Israel’s central bank. Today he holds dual citizenship. Prior to living in Israel, he worked as a vice chairman of Citigroup from 2002-5, the years leading to the bank’s bail-out, and prior to that was deputy director of the International Monetary Fund, chief economist of the World Bank, and professor at MIT, where he taught Ben Bernanke among others. Somewhere along the way, he acquired a personal fortune of between $14 and $56mm.

We are thus to understand that President Obama, having searched the entire length and breadth of our land, could find nobody better than a 70 year old with Wall St. and International Monetary Fund baggage who had most recently worked for a foreign government.

The second nominee after Fischer is Lael Brainard, who has recently worked at the Treasury as an undersecretary. Ms. Brainard told senators that the Fed should protect “the savings of retirees.” She did not bother to explain how refusing to allow interest to be paid on savings, or seeking to foster inflation higher than interest would do so.

The final nominee, Jerome Powell, would be a reappointment. Although not a Phd economist and nominally a Republican from the George H. W. Bush administration, he fits the Obama mold in other ways, notably by being from Wall Street, and by being willing to keep quiet and go along. His most daring moment came when he called the Fed’s money creation machine under Bernanke and now under Janet Yellen “innovative and unconventional” and added that “likely benefits may be accompanied by costs and risks.” He has been a reliable vote for Bernanke and likely will be for the Yellen/Fischer regime as well.

Senator Corker ( R-Tenn.) waxed enthusiastic about this group of three, saying “I’m impressed,” and leading bond manager Mohamed El-Erian describes them as a “dream team” together with Yellen.

This does indeed seem to be a “dream team” for Wall Street, for corporations boosting profits to record levels with the help of government deficits, for other special interests feeding off the stimulus trough, and for government employees. For everyone else, it just promises more and eventually even worse economic misery.