These are strange days in the global capital and commodity markets. The macroeconomic terrain isn’t quite familiar either. No wonder, then, that central banking isn’t quite itself either.
The weird aura is second to none in these United States, where the Federal Reserve is battling, among other things, a bout of the unfamiliar and unusual. Two recent commentaries by observers from the dismal science offer a sampling of how life in the central banking trenches is something other than par for the course of late.
“Recent Federal Reserve activities suggest that Chairman Ben Bernanke went from being in charge to losing control of the Federal Reserve in the span of a few days,” wrote Michael Cosgrove (an economist who runs the Econoclast consultancy in Dallas and is a professor at the University of Dallas) in an op-ed this week in Investor’s Business Daily. As a result, Cosgrove wonders if the longer-term direction of monetary policy is “up for grabs” after the election.
The fact that Fed Chairman Bernanke has broken with recent precedent and talked so openly and forthrightly about the dollar is one clue that’s something’s a bit amiss at the central bank, Cosgrove suggests. Another curious sign is the fact that there’s a relatively high degree of public dissent among Fed members in 2008. That’s raising an unusual amount of questions about whether the central bank has a sound monetary policy plan or is struggling with internal fighting.
“It looks like Bernanke, an academic, is attempting to run the Federal Reserve like an academic institution,” wrote Cosgrove. But “Bernanke can’t run the Fed like an academic institution. He needs to learn that quickly, or he will be leaving the Federal Reserve when his term is up in 2010. It may already be too late.”