Priceless: How the Federal Reserve Bought the Economics Profession

Priceless: How the Federal Reserve Bought the Economics Profession

www.alternet.org

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism

(visit the link for the full news article)

This is an awesome, non-partisan article about the control and dominance of the Fed in the economic industry that determines monetary policy in America.

It goes into detail, lists names, dates, and other verifiable facts about the Fed employing and bribing (either paying them as consultants, giving them tenures or seats on influential academic journals, or prestigious scholarships) the vast majority of high-ranking economists in the US.

It also talks about how the Fed purposefully manipulates monetary policy for certain parties to its own benefit. It's a great and illuminating article that I hope everyone reads...

Of course some of you probably don't have time to read 6 pages of information, so I've provided some quotes that I thought were particularly relevant for you all below.

www.alternet.org
(visit the link for the full news article)

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."

Auerbach concludes that the "problems associated with the Fed's employing or contracting with large numbers of economists" arise "when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications."

The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank's money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.
"Try to publish an article critical of the Fed with an editor who works for the Fed," says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.

Galbraith, a Fed critic, has seen the Fed's influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.
They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. "The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed," Galbraith says.

Rosner, the Wall Street analyst who foresaw the crash, says that the Fed's ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.
He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy.

SNIP

When Rosner was casting his paper on CDOs and MBSs about, he knew he needed an academic economist to co-author the paper for a journal to consider it. Seven economists turned him down.

The other hypothesis, he says, "is that they're essentially using taxpayer money to wrap their arms around everybody that's a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality."

And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him," Krugman said of Greenspan in a 2007 interview with Pacifica Radio's Democracy Now! "Nobody really wants to cross him."

SNIP

Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.

The Huffington Post reviewed the mastheads of the American Journal of Economics, the Journal of Economic Perspectives, Journal of Economic Literature, the American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, the Journal of Political Economy and the Journal of Monetary Economics.
HuffPost interns Googled around looking for resumes and otherwise searched for Fed connections for the 190 people on those mastheads. Of the 84 that were affiliated with the Federal Reserve at one point in their careers, 21 were on the Fed payroll even as they served as gatekeepers at prominent journals.
At the Journal of Monetary Economics, every single member of the editorial board is or has been affiliated with the Fed and 14 of the 26 board members are presently on the Fed payroll.

A former Fed economist disagreed[with those that support the FED]. "I was an economist at the Fed for more than ten years and kept getting in trouble for things I'm proud of. I hear you, loud and clear," he said, asking not to be quoted by name for, well, the reasons laid out above.

It is similar to the national and international political [oops! I meant to say 'financial' sorry] "institutions" and the higher education systems all over the world....,

Can't wait until somebody breaks THAT story.

-------
This one was kind of expected. I mean, how else could it be possible to take something as mundane as "1+1=2" and turn it into a sophisticated global Ponzi scheme (being used to usurp power from citizens world-wide while exploiting them) - proclaiming ownership of all wealth while destroying all the resources that could free them from the iron grip corporate fascism?

"Economist" A.K.A. "the experts" are the only people who could "sell" the notion that fractional reserve lending is actually fair. They are also OK with the middlemen in our economy having (as a RIGHT no less) immunity from justice. They gave them the RIGHT to tax us directly - AND gave them law enforcement authority.... ALL paid for by us. By the way, it's a "for private profit" enterprise. (Anuit Coeptus indeed.)

Great catch, thanks for sharing - Starred and Flagged!

[edit on 14-9-2009 by Maxmars]

The crazy part is, this is not surprising for the whole world.

Yet we allow it to continue.

reply to post by breakingdradles


I have to wonder...if some shake up does happen in the US and we do see some kind of meaningful change in government, will it really matter?

The Fed controls the economic community and academia. If we do happen to shake up government, where do we turn to appoint those with the best interests of the people to influence our monetary policy?

We can try and buck the Republican - Democrat dichotomy all we want, but in the end, money makes the world go round, and the Fed not only controls the money but also controls the academics that teach everyone about how to control money, as well as influences how the people vote with its monetary policy.

I hope that this article gets the point across that it doesn't matter whether you're left or right, because regardless of who's nominated, the Fed is going to have its way.

reply to post by Avenginggecko


Reminds me of how "big pharma" has bought the pharmacy and medical professions. The things that are happening in economic courses are also happening in pharmacy and medical schools today, but just in a different industry.

Fed ... big pharma
economic schools ... medical and pharmacy schools
shaping economic policies ... shaping health care policies

It's sad how money and the promise of "educational grants" and power can change an entire curriculum, and get professors and teachers to ignore the obvious....




[edit on 14-9-2009 by nikiano]