MIT Economist Peter Diamond Withdraws Fed Nomination
June 7th, 2011
Request: DENIED!!
In a small victory for anti-Fed activists, MIT Professor and Nobel Prize recipient Peter Diamond withdrew his nomination for Federal Reserve Board of Governors, citing vigorous opposition by Republicans on the Senate Banking Committee, led by Ranking Member Richard Shelby of Alabama. In a New York Times article, Mr. Diamond calls his rejection to a “fundamental misunderstanding” in the body’s ability “to recognize that analysis of unemployment is crucial to conducting monetary policy.” In other words, it is the duty of the Federal Reserve to use the dollar as a tool against unemployment, better known as quantitative easing.
Sure, many Federal Reserve supporters are quick to call this denial an example of a polarized government and a refusal of a good candidate who would continue the practice of quantitative easing, which Mr. Diamond supported. This is important because of the speculation of a third round of quantitative easing, a program of buying large quantities of treasury bonds. The previous program, QE2, promised relief to the unemployed and a spur in job growth. To accomplish this, the Fed bought $600 billion in Treasury bonds, but the results were small and insignificant. Unemployment continues to go up, and the dollar continues to weaken.
Also to Mr. Diamond’s disadvantage was that he has no experience as a monetarist, given his Nobel Prize was for labor market theory rather than monetary theory. He tried to compensate this by making connections between labor markets and monetary policy, a theory promoted by the Federal Reserve in its current form, yet has not found a cure other than the printing of money. Mr. Diamond also believes in a more independent Federal Reserve, an apparent jab at the “Audit the Fed” proposals frequently championed by Rep. Ron Paul (R-TX) and Rep. Barney Frank (D-MA). Given the Federal Reserve’s exuberant spending practices, most notably the secret $80 billion loan program in 2008, further removing it from congressional scrutiny would give them licence to continue with these practices without the people or the government knowing, and that is a risk we as a country can’t afford to take. Oh, and one of his students at MIT was none other than Ben Bernanke. Need I say more?
A strong, unchecked Federal Reserve would be a catastrophe for our nation’s financial well-beng, and oversight is necessary to ensure secretive practices are brought to the public’s attention, because when they control the money….they control everything.
