The End of Independent Central Banks?!

Simon Wren-LewisSimon Wren-Lewis asked a good question yesterday, Can Central Banks Make 3 Major Mistakes in a Row and Stay Independent? He pointed out that the central banks (the Federal Reserve, Bank of England, and so on) are primarily responsible for the housing bubble and resulting market crash. Then, when the governments stupidly turned to austerity, the central banks did nothing — in particular, they didn’t make it clear to policy makers that they really had no tools at their disposal. And the third mistake, Wren-Lewis thinks, is this big push now for the central banks to “normalize” the situation. By that, they mean raise interest rates back to where they would normally be and not right at zero.

Wren-Lewis’ concern is that the central banks acting so badly will cause them to become controlled by elected officials. He thinks this is a bad thing because he looks back to The Great Moderation after Paul Volcker and others tamed the business cycle. I appreciate that way of thinking. At the same time, the central banks are unaccountable plutocratic institutions. Today in the United States, the Fed doesn’t seem to care about workers. It seems only interested in doing the bidding of the banking industry.

It’s kind of hard for me to think that making central banks dependent upon the whims of democratically elected officials is all that bad.

I think it is very interesting that when the European Central Bank was formed, it was not given a dual mandate to stabilize prices and maximize employment; it was only given the mandate to stabalize prices. This fact almost caused the EU to break apart in 2010 when the bank didn’t seem to see its purpose as being the lender of last resort. But the point is that things have changed so much since the 1960s when it was generally agreed that people needed jobs. Now the plutocrats are in charge and all they care about is making their own lives better.

So it’s kind of hard for me to think that making central banks dependent upon the whims of democratically elected officials is all that bad. As Simon Wren-Lewis noted, “What central banks should be doing in these circumstances is allowing their economies to run hot for a time, even though this might produce some increase in inflation above target.” But instead, we are getting the opposite. After years of stagnant wage growth, the first sign of increasing wages makes them freak out and want to slow the economy. As Dean Baker always says, this is a decision to put millions of people out of work.

As long as we have a central bank that cares only about the interests of the financial industry, I think it is a mistake to have it independent. In that case, no matter how good the government’s fiscal management, regular workers will continue to see their wages stagnate. And they will be the lucky ones in that they at least have jobs. The Federal Reserve has been unable to help the American worker for almost a decade, but can (and apparently will) hurt the American worker as the economy improves. This makes me wonder about independent central banks. We the people have to take control — either directly or by putting better people in them.

Morning Music: Two Special Moment in Paris

Luxembourg Garden GazeboI want to take a quick break from Merle Haggard, just because I feel like it. I remember two major things about being in Paris. We performed at many places but two really stood out. The first was Notre Dame de Paris. The thing about that was that we were only allowed to perform sacred music there. That cut out most everything we did. The only thing I can remember that we did was Bach’s cantata Herz und Mund und Tat und Leben, which means something like “Heart and Mouth and Deed and Life.” You probably know it best from last of its ten movements, “Jesu, Joy of Man’s Desiring.” For whatever reason, I just want to listen to it today.

It was very special to perform there. I’m not religious and I never have been. But I love religious art, architecture, music, and even ceremony. It’s all meant to heighten the religious experience. But to me, all that peripheral stuff is the religious experience. And they are probably more important than ideas in the religion anyway — especially for the illiterate masses that followed the religion all those years in a language they didn’t understand.

The other great Paris experience was performing under a gazebo in the Luxembourg Garden. It was probably a weekend afternoon and there were many hundreds of people sitting around listening to us. They hadn’t come to listen to us. They were just there. People played there all the time. It was a pleasant way to spend an afternoon. But we were perhaps 15 minutes into our performance and it started to rain — hard. I figured everyone would run away. But they didn’t. They just opened up umbrellas and continued to listen. It was one of the most remarkable experiences of my life.

Anniversary Post: The Apple I at 40 Years Old

I am out of time, and I must get up early and visit my brother this morning. So I’m replaying last year’s anniversary post. But it’s quite interesting. It’s worth another go. -FM

Apple IToday, the Apple I is 40 years old. The company itself was started just ten days earlier. It’s interesting that in the public consciousness, Apple is Steve Jobs. Yet the first Apple computer was not built by Steve Jobs. In fact, I don’t think that Steve Jobs ever built a computer. He was the sales guy — the PR man. The Apple I was built by Steve Wozniak. So was the Apple II. Wozniak was the tech guy of the company for as long as the company couldn’t afford to hire tech people from outside.

Apparently, a year earlier, Wozniak had attended a computer club meeting. He was so inspired that he decided to build his own computer. And a year later, he had. Forgive me for not thinking much about the non-technical aspects of business, but I just don’t think that Jobs’ “idea” of selling the computer was all that brilliant. But he’s the man who everyone remembers. And he’s the man who every know-nothing uses (along with Bill Gates) as examples of entrepreneurship and why we need to keep Mitt Romney’s taxes low.

The Apple I was a pretty basic unit. It came with 4 KB of memory — which could be expanded to 8 KB on board or 48 KB with expansion cards. I know, this sounds like nothing. But the truth is that with 48 KB, there are some pretty decent user applications that can be created. In particular, I’ve run totally acceptable word processors and spreadsheets on computers of that quality. But the biggest thing that limited all computers of that age was the video. The Apple I had a 40×24 character display. It looked something like this:

On March 5, 1975 Steve Wozniak attended
the first meeting of the Homebrew
Computer Club in Gordon French’s garage.
He was so inspired that he immediately
set to work on what would become the
Apple I computer. Wozniak calculated
that laying out his design would cost
$1,000 and parts would cost another $20
per computer; he hoped to recoup his
costs if 50 people bought his design
for $40 each. His friend Steve Jobs
obtained an order from a local computer
store the Byte Shop the affordable
computer store in Mt View California
for 50 computers at $500 each. To
fulfill the $25,000 order, they obtained
$20,000 in parts at 30 days net and
delivered the finished product in 10
days. Apple went on to be one of the
biggest computer companies in the world
by stealing innovations of other
companies and suing any competitors. Now
people buy Apple products because of its
brand, even though better products at
cheaper prices are widely available.

Happy anniversary Apple I!