The Fed may have changed markets forever, but they did it the right way. Let’s look at why the Fed may be wrong about where the economy is headed and what they need to do to get themselves right in the process.
The Fed’s mission has always been to control the economy. That’s why in the first few years after the Fed was founded in 1913, the Federal Reserve Board was staffed exclusively by bankers who held PhDs in economics. The Fed was their exclusive purview. They were not allowed to serve the public or influence the economic policy of the country. The Fed should be a private organization that would do its best to make sure monetary policy reflects the public interest and promotes the interests of consumers and producers. If they have ever been allowed to do anything other than that, it would be a travesty.
The Fed’s mission is even older. It was written into Federal Reserve legislation in the 1800s. It is the only major governmental body to exist without legislative mandate before the passage of the Economic Recovery Act in 1933. The only other entities that existed before the passage of the act were the government of the country and the “free masons.” The Fed’s charter as originally written stated that it was the “independent and comprehensive monetary and banking authority.”
Since its inception, the Fed has gone to great lengths to keep its mandate from being diluted. Despite never being granted legislative authority by a legislature, and being denied legal responsibility for the monetary policy of the country, the Fed has always had the authority to do whatever it had to do to make sure the monetary policy of the country reflected the interests of the country as a whole. During the Great Depression, the Fed had no choice but to cut interest rates to near-zero in order to keep the value of the dollar from falling below the level at which the Fed believed it was acceptable, in order to preserve the value of the country’s currency.
During the Obama