Tuesday, July 28, 2009
Today, I see that Tom Petruno (LA Times) is reporting that just 30% of the respondents to a Gallup poll ranked the Federal Reserve Bank's performance as "good" or "excellent", which is below the IRS. Here is an excerpt from the article:
The Gallup Poll found that just 30% of respondents rated the Fed’s performance either "good" or "excellent." Thirty-five percent rated the central bank’s performance "only fair" and 22% gave the Fed a "poor" rating. (The rest, 13%, were honest enough to say they had no opinion.)The problem is: that it is highly likely that survey respondents, i.e., the public, are misrepresenting the Treasury's actions for the Fed's actions (or vice versa). Tom Petruno indicates this in the article:
The eight other U.S. agencies tracked by the poll all received higher combined good/excellent ratings than the Fed. No. 1 on the list: the Centers for Disease Control and Prevention, which 61% of respondents said was doing a good or excellent job.
The Fed even was outranked by Homeland Security, which got a 46% good/excellent rating, and by the IRS, at 40%.
The Fed’s negative rating also may reflect that the Treasury wasn’t included in the Gallup Poll, which surveyed 1,018 adults July 10-12. People may have been grading the Fed as a proxy for the Treasury.To be sure, the Fed is purchasing Treasury debt, but the Fed remains autonomous from Congress' ever-growing deficit. Fiscal policy versus monetary policy: even Market Watch got it wrong. Watch this video, where they attribute the stimulus bill and Congressional deficit to Helicopter Ben.
The video is funny, but completely off key. The Fed and the Treasury are separate entities: the Treasury's deficits are not equal to the Fed's excessive easing measures. One could argue that the Fed is paying for the government deficits (i.e., monetizing the debt), and it technically is since the Fed is targeting lower Treasury rates through its buyback program. However, that is just $300 billion of the Fed's $trillion in liquidity measures and asset purchase programs, all of which can be "taken back" (hence, the Fed's exit strategy). The Treasury must "take its measures back" too, but that requires paying down a deficit - completely different. The Fed is working on its own, and is not "in bed" with the Treasury.
In fact, the Fed must reiterate this over and over in order to maintain its credibility with financial markets. At least that is what Bernanke was trying to do last night in front of a group in Kansas City (see video below). I did notice, however, that speaking "layman" is not one of Bernanke's fortes.
The public's confusion as to what constitutes monetary and fiscal policy is not helped by these incomplete polls and videos (the Market Watch video).