Should the Federal Reserve Exist or Remain Independent? Should the System Be Abolished? (2009)

The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) has faced various criticisms since its inception. The system was established on December 23, 1913 as a third attempt at central banking in the United States. The Federal Reserve Act was considered to be the solution to the money trust even though elements of the system were conceived by Nelson Aldrich and banking executives.

Ryan Grim of the Huffington Post has argued that the Federal Reserve System "so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession..." Grim quotes Wall Street analyst Joshua Rosner as saying: "The Fed has a lock on the economics world..... There is no room for other views, which I guess is why economists got it so wrong." Grim argues that the Federal Reserve System maintains some control over economists through such publications at the Journal of Monetary Economics where, he says, "more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past."

Grim also writes that economist Milton Friedman had concerns "about the stifled nature of the debate" over economic policy. He wrote to a colleague that ".....having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results...."

Wall Street analyst Rosner wrote, according to Grim, "a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound."

Economist Paul Krugman has been critical as well. In a 2007 interview with Pacifica Radio's Democracy Now!, in referring to Alan Greenspan, Krugman said: "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him.... Nobody really wants to cross him." In 2007, Krugman also stated: "And two years ago, the conference was devoted to a field, new economic geography, that I invented, and I wasn't invited."[38]

According to a Bloomberg poll taken in 2010, Americans across the political spectrum say the Fed shouldn't retain its current structure of independence. When asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable, 37 percent favor the status quo, and 16 percent that it should be abolished.

http://en.wikipedia.org/wiki/Criticis...