$ame old $ame old

The appointment of a new Federal reserve chairman should trigger a thorough and badly needed examination of that institution’s purposes and the principles on which it bases its actions. That won’t happen, however. For unfathomable psychological reasons, monetary policy is one of those subjects that absolutely intimidate most people, which is why the Fed gets away with extraordinary power grabs and long periods of poor performance with only the most cursory, perfunctory glances from congress.

Jerome Powell, nominated by President trump to succeed Janet Yellen as Fed head in February, has given no indication that he has core questions concerning the operations of the world’s most powerful central bank. He has largely been go-along, get-along during his five years as a Federal reserve board governor. Perhaps he’ll surprise one and all by posting the Fed equivalent of Martin Luther’s 95 Theses.

Here are some areas he can focus on.

• The belief that the Fed can constructively guide the economy’s performance. economists and policymakers regard as holy writ the fantasy that the economy can be steered, as if it were a car, and that the Fed’s task is to make sure the economy gets neither “too hot” nor “too cold.”

The Federal reserve, or any central bank, can no more control an economy than long-ago Soviet central planners could. How could it, with 330 million people in the U.S., 7 billion people around the world and countless millions of entities of all kinds engaging in more than 100 billion transactions each day?

because of the Fed’s pursuit of this futile quest, the only sensible question to ponder is how much damage will our central bank do? Since 2008–09, the sad answer has been: a lot. Dealing decisively and quickly with a financial panic is fine. but the Fed’s ferocious suppression of interest rates afterward (equivalent to price or rent controls), along with its repeated “quantitative easing” programs, bollixed up the proper functioning of the credit markets, seriously harming access by households and new and smaller businesses.

• Belief in the superstition of the Phillips Curve. The Fed clings to the idea that prosperity causes inflation and that inducing unemployment—that is, trying to make millions of people lose their jobs— cures it. And then there’s the decade-old mantra of needing to raise the inflation level to get the economy out of its post 2008–09 torpor. real-world experience has demonstrated the preposterousness of that idea.

• Belief in the hyperregulation of banks—and every other financial institution. With gusto—and egged on by Washington politicians—the Fed and other regulators have been smothering banks with tens of thousands of new rules, ostensibly to prevent another big crisis. If you put aside the fact that banks were the most heavily regulated part of our economy, the inconvenient truth is that if all of these regs had been in place a decade ago, we still would have had a big disaster, because the root cause of it was the weak dollar.

• Belief in a floating dollar. Markets work best with fixed weights and measures. everyone knows how chaotic life would be if the number of minutes in an hour or ounces in a pound fluctuated. The same is true for money, which is supposed to measure value. Until we blew it all up in the early 1970s, the U.S. had had a fixed value for the dollar since Alexander Hamilton established it with a gold standard in 1791. It’s no coincidence that the U.S.’ average pace of economic growth since then has fallen sharply.