Fed response to trading scandal risks more damage to reputation
“Critics say central bank has done too little to alleviate transparency concerns.”
USAGOLD note: The Fed comes under fire for the trading practices of top brass, including its chairman and vice-chairman, in a way few anticipated. “This makes it harder for people to stick up for the Fed and insist on the Fed retaining its independence,” says MIT professor Simon Johnson. Should the Fed’s critics succeed in undermining its independence, little stands in the way of a politically influenced monetary policy. In turn, we see little real resistance in either political party at this juncture to running significant budget deficits and printing money to cover them. Though now pretty much in the background, should the movement to undermine Fed independence gain traction, it will have major long-term implications for the dollar and gold.