What Janet Yellen Will Host And Why

We don't think the Fed's positioning is all that convincing but we see no indication that those at the top have any new ideas about how to handle criticism aimed at them and the institution. 

Granted, Bernanke has tried. Central banks generally have adopted a policy called "forward guidance" that actually attempts to explain the intentions of central bank policy makers and present goals. This is supposedly an attempt to counter the criticism that central banks are not in any sense genuinely democratic or open bodies. 

But forward guidance doesn't make sense on numerous levels, especially because as a concept it's quite a squirmy one ... 

Tell people that central banks are giving away freshly printed money to cronies, and they'll understand the idea and usually endorse it. Tell them that central banks are more open now because they've adopted a policy called forward guidance and people will likely experience a disconnect between the problem and the proposed solution. 

Of course, the Fed as an institution is not used to confronting challenges to its basic authority. Its main defense is the legislative privilege it has been granted to print monopoly money. 

After 100 years, this privilege has been vitiated by the Fed's abysmal performance. Every decade there are ruinous slumps and twice within about 75 years there have been financial crises involving the whole world. 

Those who want to see the Fed done away with or at least restrained have begun to concentrate not on Fed competency but on Fed transparency. This is where the battle will be waged in the future.

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