It's About All Of Us

Here is part of a comment Bill Woolsey left for Bonnie Carr, at dajeeps: "...finance is not working right!...Isn't it the job of the macroeconomist to figure out a way to help the Fed what it is comfortable doing?" To which Bonnie replied, "Monetary policy isn't about the people at the Fed - it's about average Joe."

Of course, all of the above rings true in the present. Not only is finance not working "properly", one can hardly discern what is working properly, in economic terms.  However, we are in a somewhat unique historical position, in terms of a growing public understanding of monetary policy in general. In the twentieth century it basically became the job of the specialist to determine public policy. And as the previous century wore on, more people became educated in multiple disciplines which define policies in the first place. As the public gradually became aware of  political, monetary and economic environments, the processes of governing became more complex at the same time with the added input and dialogue. Plus, more specialists meant a growing number of viewpoints than was actually possible, to implement.  In ordinary times when economies function reasonably well, additional viewpoints aren't so noticeable.  It's mostly when unemployment and uncertainly prevail, that the non-specialists and amateurs among us (reference yesterday's post) seem to "come out of the woodwork" to have our say. And even economists recognize that anyone who has a stake in monetary outcomes, has a stake in monetary policy as well.

Depending on where we stand in the organizational hierarchy (or not) we may be looking to certain groups, or even subgroups, who are supposed to somehow fulfill the "ultimate responsibility". In rough economic patches such as this, everyone could breathe easier, if only some decision making process to "settle the matter once and for all", were possible. Depending on where we are along the spectrum of possibility, some might even see the economist who is supposed to "do the job" (as Woolsey stated) in superhero gear.

And then there's the individual we all hoped could "get it right": Ben Bernanke. To what degree have his hands actually "been tied?" While there has been plenty of debating as to whether he needs more or less control over outcomes, the question remains, would he use such "control" appropriately if he had it? And who is asking, i.e. what sort of control do they believe to be appropriate?

When we look at the totality of the situation, it becomes clear the public is a considerable part of the process, even if it doesn't quite seem so. How many recalcitrant central bankers are simply responding to the reasoned opinions of a nation's populace? We might say - as to the opinion that gets heard the most frequently - "Well that's just a crazy opinion." But why do people give up on continued prosperity, in the first place? Such despondence comes from many different points of reasoning, which often are not thought through or considered in any organized fashion.

Political divisions certainly have not provided such opportunities for real dialogue between divisions. There are just certain times when everyone needs to come into "the same room" at once to figure out how to move forward...which is what people are at least trying to do through the Internet for lack of a more understandable space to do so. We're not yet at the point of "breathing easy", which would imply leaving the job to those with the "best" or "right" decision. With a little luck, central banks may begin level targeting of NGDP. However, in order for such fortuitous circumstances to last for the long run, we all need to know and understand what's at stake.