There is a political battle brewing over our currency. One recent, Financial Times article indicates that Senator Barney Frank is mounting an offensive for the big government contingent.
In a separate article, Gillian Tett of the Financial Times, describes philospher Georg Hegel’s belief that “history proceeds with pendulum swings. First there is a thesis (a political movement or idea); then ‘antithesis,’ (violent reaction)..”
The thesis here would be that Central banking should be independent of the Federal Government. The comptrollers of our currency should be free of the influences that inevitably infiltrate and taint officials’ decision making. The thesis is based on the fact that the money is rightfully the property of the citizens; that throughout history government officials have proven themselves untrustworthy custodians.
We have penned here that government has no business “picking winners.” That our rulers do not have the proper resources, collective intelligence, to fulfill this mandate. That mis-allocation of capital is the most likely end to central planning. Market participants, acting with self interest are the most efficient administers of our precious capital resources.
Along comes a crisis, an extended crisis. Barney Frank’s interpretation, the pendulum is swinging. Government can seize the opportunity to wrestle some control. The Senator from Massachusetts proposes that politicians not only get to appoint the Chief of the central banking committee, but all the voting members as well, government appointed puppets.
With all due respect, Mr. Frank, this investor reads the cards differently. The way I see it, Alan Greenspan, Ben Bernanke, Hank Paulson, Tim Geithner and the major commercial banks of this country have failed us in concert with the official policies coming out of Washington. It is thus my hope that the pendulum is in full sway, and gravity is taking it away from our Capitol Building.
President Obama gave a speech on his idea of what the country needs for job creation. The political solution caused the market to gap open down 1.25% and proceed to trade down over 4%. The market has roared back over 5% from the Thursday lows, and indication that the pendulum is swinging. Perhaps Mr. Obama’s proposal was so bad that it was actually good. Might the market have put a period at the end of Mr. Obama’s term and embraced a new hope..
Let their be no mistake, if the market controlled the discount window, these banks would be a mere memory. But if the market had their say we wouldn’t likely be having this conversation either.
” ‘The Federal Reserve presidents are a constraint on what Ben Bernanke wants to do,’ said Mr. Frank. ‘And they undermine his effect.’ ”
Again, with all due respect, Thank God. The prescription peddled in Washington is the cause of the problem. The “hawks” know this is no cure but only black magic being marketed as the fountain of youth.
Fed “hawks” Kocherlakota, Plosser and Fisher have voted their conscious, the epitome of independence. Their views are less tainted by the politics of Washington, and their incentives, therefore, better aligned with the majority of stakeholders, the citizens.
Three dissenting votes are indicative of a swinging pendulum. Mr. Frank is not advocating a new arcing path, he is advocating for a larger amplitude in the present direction. He is advocating for the pendulum’s confiscation.
Let the pendulum swing America.
For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, Douglas R. Terry is reachable at email@example.com