This epitomizes what´s wrong with the post-Greenspan Fed

Trying to sell the view that all´s calm and quite in the “Kingdom of Denmark”, Jon Hilsenrath writes “The Decline of Dissent at the Fed”. The caption of Hilsenrath´s piece is “In an interview, the new centrist in Dallas backs slow rate hikes, as officials with dissenting views have departed”, where we read:

The Fed needs to keep raising short-term interest rates to diminish risks to the economy and markets of “excessive accommodation,” Mr. Kaplan told the Journal on Monday. However, fragile and interconnected financial markets, slow global growth, and the perils of driving the economy back into recession all mean the Fed can’t move aggressively, he said.

“We want to try to normalize [interest rates] as fast as we can,” Mr. Kaplan said in a Dallas office stuffed with memorabilia from his home state of Kansas and with management “how to” books he wrote at Harvard. “But we have to be patient and gradual.”

Yes, dissent has diminished. They´re all of the same view, having embraced the monetary policy framework that Kocherlakota has aptly named “gradual accommodation”.

The only divergence is in the definition of “gradual”. To some it means “start in April”. To others it means we can “hang on to what we´ve got” for a while longer!

Fools all!

Update: The new meaning of dissent: Difference in desired speed of “normalization”

3 thoughts on “This epitomizes what´s wrong with the post-Greenspan Fed

  1. Not sure I agree with the “decline of dissent”. More likely that a lot of disgruntled Fedborg types are upset that their ideological “normalisation” meme has been put on the backburner. Their mates at Goldman Sachs and at the WSJ trying to spin it as “decline of dissent”. An alternative is that the dovish dissenters have triumphed. More pro-prosperity types have taken the lead, Brainard and Kashkari, even Yellen maybe, emboldened by the “four more hikes” debacle. Maybe I’m just a hopeless optimist, though I hope not.

  2. Worse, Kaplan is boring where Fisher was egregiously and flamboyantly wrong without exception.

    How can we make accurtae economic forecasts without Fisher?

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