11 November 2015

Talk About Failing Upwards

Neel Kashkeri, one of the mismanagers appointed by Hank Paulson to bail out the banksters, has been named to the presidency of the Minneapolis Federal Reserve:
Neel T. Kashkari, who oversaw the government’s bailout of the banking industry as a Treasury official in the George W. Bush and Obama administrations, was named the next president of the Federal Reserve Bank of Minneapolis on Tuesday.

Mr. Kashkari, 42, will succeed Narayana R. Kocherlakota in that post in January. He will also take Mr. Kocherlakota’s place as the youngest of the 17 members of the Fed’s policy-making committee, the Federal Open Market Committee.

“Mr. Kashkari is an influential leader whose combined experience in the public and private sectors makes him the ideal candidate to head the Minneapolis Fed,” MayKao Hang, a Minneapolis Fed board member who was co-chairwoman of the search committee, said in a statement.

Mr. Kashkari is the third person this year appointed to lead a regional reserve bank, and all three of the new presidents previously worked at Goldman Sachs. The Philadelphia Fed in March appointed Patrick Harker, a former Goldman trustee, as its new president. The Dallas Fed in August selected Robert S. Kaplan, a former Goldman vice chairman.

Mr. Kashkari will join a minority of Fed officials who do not have advanced degrees in economics, but he has expressed strong views on monetary policy.

In 2012, Mr. Kashkari criticized the Fed’s decision to start a second round of bond-buying.

“At the end of the day, this is not going to lead to real economic growth,” he told CNBC at the time. “Unfortunately, it likely leads to an inflationary outcome.”

He also has compared bond-buying to dosing the economy with morphine — “Makes u feel better but doesn’t cure,” he posted on Twitter in 2013 — and suggested that financial markets would resist weaning.

Those views suggest Mr. Kashkari will break with his predecessor. Mr. Kocherlakota began his term at the Minneapolis Fed as a vocal skeptic of the Fed’s ability to improve economic conditions but underwent a battlefield conversion and became a leading proponent of the Fed’s efforts. He is now the only Fed official pushing to expand its stimulus campaign.
So, he's been wrong on everything, he f%$#ed up the bank bailout, and now he is President of the Minneapolis Fed.

And another Vampire Squid alumni gets to decide the winners and losers in our economy.

Paul Krugman also observes that Neel is supremely unqualified for anything resembling banking regulation or monetary policy as well:
So, if the Minneapolis Fed felt the need to maintain conservation of NK, they could have chosen to replace Narayana Kocherlakota with a New Keynesian. Instead, they chose Neel Kashkari. Brad DeLong isn’t happy, and this Twitter exchange suggests that he has good reason to worry.

I’ve written before about the all-too-common fallacy of confusing demand with supply, of arguing that because we had a bubble — so that some component of aggregate demand was unsustainable — the economy as a whole was somehow producing more than its potential. Let me just repeat what I said then:


In the words of Charlie Brown, AAUGH!

That word “artificially” is the real telltale, as is Kashkari’s description of Japanese monetary stimulus as “morphine.” It’s straight out of the liquidationist playbook, e.g. Hayek denouncing the use of “artificial stimulants” to fight the Great Depression.

So, great: we now have a liquidationist in a senior position in the Fed system.

Not just a liquidationist, a crony capitalist incompetent liquidationist.

I'm feeling so much better about our monetary policy now.


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