Letter to Santa

Love this letter to Santa found here.

Dear Santa

It is with regret that I am serving you with a Section 415 Cease and Desist order in the matter of delivery of gifts and/or presents on the occasion of the Night Before Christmas on behalf of Mr. and Mrs. Dean (hereafter “My Parents”).

My Parents note the following violations of international trade rules which constitute a prima facie case of unfair competition in the delivery of but not limited to balls, teddy bears and games:

• Anti-Dumping. The low price of zero dollars you charge is clearly below marginal cost. This seems to be a flagrant attempt to attain market share. No doubt you have your eyes fixed on Easter and Halloween, to say nothing of birthdays.
• Labor standards. You have never accepted international standards for your workforce. Your elves toil for impossibly long hours and appear to subsist entirely on leftover cookies. My Parents have serious concerns about the long-term health effects of the “magic dust” which you pump into your workshops to enhance productivity.
• Environmental standards. Your production methods are extremely carbon-intensive. My Parents are not convinced that your base in the North Pole is sustainable given the long-term decline in Arctic sea ice.
• Intellectual Property. Santa-brand Tickle-Me-Elmo dolls are an unauthorized reproduction of the real thing.
• Transportation costs. We regret your genetic modification of reindeer in respect of flight, and, in at least one case, red noses.

In light of these concerns, it is My Parents’ view that I would be better off without any such “free” presents and that my arguments against such were “naive.”

Merry Christmas.

Yours

Johnny (aged four and three quarters)

Bernanke

How Do Economists Feel About Fed Independence?

The talk about oversight and audits of the Fed have many academic economists worried about Fed independence. Here's an interesting development:

A group of academic economists — including several Nobel Prize winners, leaders of respected economic journals and former Fed officials — is dialing up its call for lawmakers to drop plans to subject the Federal Reserve to more scrutiny by the Government Accountability Office, an investigative arm of Congress.

In a letter to leaders on the Senate Banking Committee and House Financial Services Committee, the economists say a bill proposed by Rep. Ron Paul (R., Tex.) and Alan Grayson (D., Fla.) to let the GAO review Fed monetary policy would do “serious harm to the economy.” They warn increased congressional oversight would harm the Fed’s independence and ability to fight inflation.

Mr. Paul has built a popular movement in part on his attacks against the Fed and won large support in the House for his bill. Ben Bernanke, Fed chairman, has a growing body of academics on his side. Some 270 economists have signed the letter, including Edward Prescott, Myron Scholes, Daniel McFadden, Fynn Kydland, Roger Myerson and Robert Engel, all Nobel winners.

The academics sent a similar letter to Congress in November, but are trying to dial up their campaign now that Mr. Paul’s bill has been approved by the House Financial Services Committee.

Supporters of Mr. Paul argue that the organizers of the letter-writing campaign are too close to the Fed to be objective — some are former Fed officials or have served as advisers to the Fed. Mr. Bernanke, a former academic, is also friends with many of them.

The academics say the charge isn’t fair. “Hundreds of people signed the petition and most have little, if any connection to the Federal Reserve,” counters Anil Kashyap, a professor at the University of Chicago Booth Business School and a lead organizer of the campaign. Signatories to the letter include some critics of Fed policy, such as Allan Meltzer, a Carnegie Mellon University professor.

Are Federal Reserve Banks Private?

A question I have been asked very often, this is the source.

The Federal Reserve Banks, created by an act of Congress in 1913, are operated in the public interest rather than for profit or to benefit any private group.

Commercial banks that are members of the Federal Reserve System hold stock in the Reserve Bank in their region, but they do not exercise control over the Reserve Bank or the Federal Reserve System. Holding stock in a regional Reserve Bank does not carry with it the kind of control and financial interest that holding publicly traded stock affords, and the stock may not be sold or traded. Member banks do, however, receive a fixed 6 percent dividend annually on their stock and elect six of the nine members of the Reserve Bank's board of directors.

Although they are set up like private corporations and member banks hold their stock, the Federal Reserve Banks owe their existence to an act of Congress and have a mandate to serve the public. Therefore, they are not really "private" companies, but rather are "owned" by the citizens of the United States.

The Emmy goes to... Bernanke.

Dr. Bernanke can add Emmy award winner to his resume according to this story.

CBS News”s “60 Minutes” program won an Emmy yesterday for its profile of Ben Bernanke, titled “The Chairman,” aired in March from Mr. Bernanke’s hometown of Dillon, South Carolina and from inside the Fed’s marble hallways in Washington.

Fed chairmen used to live in a secretive world. But Mr. Bernanke decided he needed to open up a little amid the growing backlash against the Fed in the wake of the financial crisis. In a first for TV, he brought CBS’s Scott Pelley into his world to explain what the Fed has been doing and to convince the country he was a regular guy who could be trusted. Congrats to CBS for a nice piece. As for Mr. Bernanke, well, the backlash has just kept growing.

To see the interview, see my earlier post.

Economic Development vs. Negative Externalities

If Gretzky Were a Central Banker

Nice analogy (click here for the full story):

Hockey great Wayne Gretzky was once asked about his success on the ice. He responded by saying, “I skate to where the puck is going to be, not to where it has been.” He didn’t chase the puck. Instead, Gretzky wanted his hockey stick to be where the puck would be going next. He scored many goals with that strategy, and I believe monetary policymakers can better achieve their goals, too, if they follow the Gretzky strategy.

Good monetary policymakers, like good hockey players, must be forward-looking in their actions. Setting policy that is appropriate for where the economy is today, or has recently been, is not likely to deliver the kind of economic outcomes we desire. … Gretzky, like all great hockey players, excelled, in part, because of his ability to anticipate. That does not mean he always anticipated accurately. Sometimes his forecast turned out to be wrong and the puck went in another direction. But that does not mean that his strategy was wrong, only that his execution needed improvement. The more you understand the game or the economy, the better your forecasts will be. Monetary policymakers similarly must be forward-looking despite the difficulties, uncertainties, and challenges that entails.