The Fed: Independent, Accountable, and Transparent—so Take That, Ron Paul!

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Lew gets upset with bloggers if they just present material without comment. The material, below, on the Fed, cries out to be presented on its own, without comment. However, Lew is bigger than me, so I had better comply with his wish.

Here we have perhaps the most self-serving commentary on the Fed by an adherent of that evil institution. The Fed is to the U.S. economy as was the old central planning authority of the U.S.S.R. What controlled substance are these people imbibing? And, to add insult to injury, this “scholarly paper” contradicts itself all over the place. How can an institution, any institution, be independent, and yet accountable to anyone else? If the Fed is so transparent, why do they resist Congressman Paul’s initiative for an audit?

I give you fair warning, you had better be sitting down when you read this material. There’s a good chance you’ll keel right over in a hysterical fit of the giggles, and the floor is closer when you’re seated. Ah, would it be possible that Murray Rothbard were alive at this moment.


Over the years, there have been changes in the Fed’s structure to improve its independence, credibility, accountability, and transparency. These changes have led to a better institutional design that makes U.S. policy credible and based on sound economic reasoning, as opposed to politics. In times of financial and economic crisis, there is a tendency to reexamine the structure of the Federal Reserve System. To the uninformed observer, the Fed’s structure is in many ways mind-boggling. In particular, it seems counterintuitive that, in a democracy, the central bank should have independence from Congress. Yet, this independence is the result of Congress trying to avoid making monetary policy mistakes for political gain. Of course, accountability of public policymakers is a fundamental principle in a democracy. It is the tension between independence and accountability that led to the design of the Federal Reserve, and it has been an everpresent force in U.S. monetary policy for the past century.

In the end, the Federal Reserve System is a well-designed institution, created by Congress, that keeps the government from relying on the printing press to finance public spending. It is independent, credible, accountable, and transparent. It is a nearly 100-year-old success story that has served the nation well.

Independence + Accountability: Why the Fed Is a Well-Designed Central Bank
by Christopher J. Waller
in Federal Reserve Bank of St. Louis Review, September/October 2011 Vol. 93, No. 5, pp. 293–302

In 1913, Congress purposefully created the Federal Reserve as an independent central bank, which created a fundamental tension: how to ensure the Fed remains accountable to the electorate without losing its independence. Over the years, there have been changes in the Fed’s structure to improve its independence, credibility, accountability, and transparency.

I owe this to Bill Barnett II and his son Michael Barnett

2:31 pm on September 26, 2011