Peter Diamond Withdraws – Partisan Politics and the Federal Reserve

Economist Peter DiamondOver the weekend, Federal Reserve Nominee and Nobel Prize winner Peter Diamond withdrew from consideration in an op-ed column in the New York Times, citing strong Republican opposition.

… I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination. How can this be?  The easy answer is to point to shortcomings in our confirmation process and to partisan polarization in Washington. The more troubling answer, though, points to a fundamental misunderstanding: a failure to recognize that analysis of unemployment is crucial to conducting monetary policy.

The question of whether or not senate approval committees know enough about the field of policy for which they approve is an interesting one.  One thing is certain, however.  The state of economy, the skyrocketing of the national debt, and the devaluation of the dollar are the central political questions of our time.  We can expect a more dogmatic approach as experts from different schools of thought or political affiliations are discredited out of hand.

We believe that rising government debt and continued destruction of the dollar has to stop.  Honestly, we’re not so sure the Federal Reserve is a good idea to begin with.  If there is going to be a Federal Reserve, though, we’d prefer it be stocked with economists that don’t think we can print our way out of the current problem.  The interesting question for anyone in a time of crisis: do we believe it enough to reject, without consideration, the merits of any argument (or in this case, nomination) that is embraced the position we oppose?  More on this subject, and on the Fed in general, in the weeks to come.

When A Nobel Prize Isn’t Enough | The New York Times

Photo: Donna Coveney/MIT

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