In Praise of the Kansas City Fed
Read through biographical blurbs on Herman Cain and chances are that you'll only run across two entries on the presidential candidate's resume: that he was the President and CEO of Godfather's Pizza and that he's been a talk radio host in Atlanta. But given the frequent rebuke that he's too inexperienced to run for the highest office in the land, there's one curious omission: Cain served as the Chairman of the Kansas City Federal Reserve board from 1995 to 1996 (his service on the board began in 1992).
Why the silence? Perhaps it's because in this -- one of the few presidential elections where monetary policy will even elicit a mention -- being associated with a central bank is more fraught with political peril than at any time since the era of Andrew Jackson. But Cain was no easy money apostle. As a colleague of his told the Atlantic, "Inflation was always the big bugaboo ... and when it comes to monetary policy, he was an inflation hawk."
In the age of Bernanke, this may seem exceptional. The "quantitative easing" era is one in which the Fed acts as if the link between the money supply and inflation has all the intellectual respectability of alchemy, while the supposed ability to gin up consequence-free prosperity from the printing press is treated as a matter of Newtonian certainty.
Yet Cain's displacement from the modern weak dollar mainstream has more to do with geography than chronology. Though it goes unnoticed outside of all but the wonkiest circles, the Kansas City Fed is consistently the nation's sanest force when it comes to sound money. Apart from Cain's tenure, consider the following:
-- The Kansas City Fed's president, Thomas Hoenig, is as vigorous an inflation hawk as you'll find inside the Federal Reserve system. When the Washington mothership was busy underwriting every bad investment in America, Hoenig's delightfully sober response was "It is not a question of avoiding those losses, but one of how soon we will take them and get on to the process of recovery." What is this brave new world where economists understand that markets must clear?
-- The KC Fed hosted the 2005 symposium in Jackson Hole, Wyoming, where market economist Raghuram Rajan warned of the signs of a coming crash. At the time, Larry Summers referred to Rajan's thesis as "slightly lead-eyed" and "misguided."
-- The same source responsible for the quote about Cain in the Atlantic went on to say about the Kansas City Fed "I'll tell you, that's the most conservative bunch of guys I've ever met."
All that being said, the next Republican president should have a question for the folks in Kansas City: how soon can you get to Washington?
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Comments :
Oct '10
Re: In Praise of the Kansas City Fed
That's interesting. Too bad the regional banks have very little power. My understanding is that they have become more like university economic departments where the staff economists conduct research on a wide variety of topics other than monetary policy.
Re: In Praise of the Kansas City Fed
They are relatively weak, Todd, but, with two vacancies currently on the board in Washington, the appointment of Hoenig (who is about to retire from Kansas City) and another like-minded figure could go a long way towards rebalancing our monetary policy. Here's to hoping for a Republican president who understands that fact.
Edited on Jun 10, 2011 at 11:42amRe: In Praise of the Kansas City Fed
This sort of experience on the part of Herman Cain is a real plus. Too many of the candidates know next to nothing about the Federal Reserve system. Given its role in causing the recent recession, that is not good.
Oct '10
Re: In Praise of the Kansas City Fed
Not surprisingly, other than maybe Ron Paul, Paul Ryan is probably the (potential) candidate that knows the most about monetary policy. He has been proposing monetary policy reform - specifically the repeal of the Humphrey Hawkins Act and the return to a single mandate- for years. This op-ed was from early 2008.
Edited on Jun 10, 2011 at 12:18pmApr '11
Re: In Praise of the Kansas City Fed
Troy, as a born & bred Kansas Citian, I have to ask you...don't you really mean to say, "the next Republican president should have a question for the folks in Kansas City: how soon can Washington monetary policy makers get HERE?"