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The Federal reserve system (fed), through its extensive network of consultants, visiting research staff, pupils and staff economists, so dominant in the economic environment that the real criticism of the Central Bank became risky for the careers of economists, as discovered by investigation the Huffington Post.
This dominance may explain why, even after the fed failed to foresee the greatest economic crisis since the great depression, the Central Bank has largely managed to avoid criticism from academic economists.
Economists, being in bondage to the fed and themselves-that the crisis was not foreseen.
The fed controls the economic world, says Joshua Rosner, an analyst with wall street, correctly predicted the crisis. – Other views has no place, and I think that’s why economists are so far off in their forecasts.
One critical control channel FRS on academic economists is through communication with the gatekeepers of the industry. For example, more than half of the editorial Board of “journal of monetary Economics” (Journal of Monetary Economics), the publication of which is required for those wishing to achieve anything economists working for the fed, and the rest worked in the past.
The fed saw the housing bubble when he was in full swing, insisting that the rise in housing prices in the order of things. In 2004, when even the police and janitors know that you can get rich by reselling real estate, the then fed Chairman Alan Greenspan said that “the price distortions the national scale is unlikely.” After a year his successor, Ben Bernanke said that the boom “largely reflect strong economic fundamentals”.
The fed also did not sufficiently regulate major financial institutions, with Greenspan – like and influential economists believed that in the interests of the banks self-regulation.
Despite all this, President Obama has nominated Bernanke for a second term.
In the economic environment, the President continues to be popular and raskalivaetsa in response to the crisis, which is actually most fed and was provoked. Congress is even considering a bill to significantly expand authority of the Federal reserve system to regulate the financial industry.
Paul Krugman, in Sunday magazine-the Annex to the New York Times did its own analysis of the economy, asking: “How economists could be so wrong?”. Krugman concluded that “the economic sector has been in trouble because economists succumbed to the temptation of fantasies about the ideal, harmonious market system”.
They were tempted by the fed.
Three decades of domination
Fed’s dominated the industry for about three decades. “After the Second world war the fed was not for economists something very important, and their views on monetary policy have not been determined business relationship with the fed. So probably it began in the mid-1970s, says a Professor of Economics at the University of Texas and a vocal critic of the fed, James Galbraith. – A generation which I studied, which included Milton Friedman on the right front and Jim Tobin on the left, not dependent from the fed. They sent students to the fed and influenced the fed, but there was no culture of counselling, and it did not work such a vast network of professional economists.”
But when in 1993, fed Chairman Greenspan provided the banking Committee of the U.S. house of representatives the number of economists working for the fed, it was found that 189 economists working directly for the governing Council and 171 at the regional banks. If you include statisticians, support staff and “servants” – which, as a rule, are also the economists, the total number reached 730. And there’s still contracted. Over a three-year period ending in October 1994, the fed has been signed by 305 contracts to 209 professors worth $3 million.
What is the scope of today’s domination of the fed?
According to the press Secretary of the Federal reserve, the Federal reserve Board of governors working 220 doctors of economic Sciences and a large number of researchers and support staff. 12 regional banks runs much more. (HuffPost was unable to know the exact number). The fed also distributes millions of dollars in contracts to economists for consulting services, articles, presentations, seminars and cooperation as a so-called “invited experts”. Press Secretary of the fed said that data on the exact number of economists with whom they signed contracts is not available. But, according to her, in 2008 the fed spent $389,2 million in “monetary and economic policies” – analysis, research, data collection and market structure. In the budget for 2009 provides $433 million
For a relatively small number of economists this is a considerable amount of costs. According to the American economic Association (AEA), only 487 economists cite as their main or secondary specialization “monetary policy, Central banking, monetary circulation and credit”, 310 list “money and interest rates” and 244 – “macroeconomic policies and public Finance aspects and General policy”. The national Association for business Economics (NABE) told HuffPost that 611 of its roughly 2,400 members are involved in its “financial round table”, which is the most accurate approach of counting the number of those who focuses on monetary policy and Central banking.