CPD IN THE NEWS

The Democratic national platform’s language calling for a more diverse Federal Reserve and for the promotion of full employment is historically progressive, but it still could be stronger, some activists say.

Advocates on the “Fed Up” campaign, led by the progressive Center for Popular Democracy, are pleased that the platform — amended in a committee meeting over the weekend — includes language that supports banning commercial bankers from Fed leadership.

But the activists are still hoping for more explicit support bolstering the Fed’s mandate to promote “full employment,” said Jordan Haedtler, Fed Up’s campaign manager.

As it stands, the platform committee adopted an amendment to “protect and defend the Federal Reserve’s independence to carry out the dual mandate assigned to it by Congress — for both full employment and low inflation — against threats from new legislation.”

An amendment promoted by Fed Up would have sketched out a more detailed stance on full employment, but it failed 70-100 at the meeting. That amendment stated: “The Federal Reserve should be a fully public institution that serves the American people and pursues a genuine full employment economy that creates good jobs and rising wages for all.”

Haedtler said the platform’s language about protecting the the Fed from “the threat” of new legislation might actually be counterproductive. His group hopes to lay the groundwork for legislation overhauling the central bank during the next administration. It is likely, however, that the platform writers were referring to legislation from conservatives to abolish the Fed or severely shrink its capabilities.

“I appreciate that full employment is fleetingly mentioned, but the fact is that sound new legislation regarding the Federal Reserve is necessary,” Haedtler told Morning Consult in an interview.

Democrats in Congress have also pushed for more diversity in the Fed’s top layer. Sen. Sherrod Brown of Ohio, ranking Democrat on the Senate Banking Committee, pressed Fed Chair Janet Yellen during a recent hearing for a commitment to fixing the bank’s diversity problem.

“Diversity is an extremely important goal, and I will do everything I can to advance it,” she told him.

The words “full employment” haven’t appeared in a Democratic National Committee platform since 1988, Haedtler said. But Fed Up hopes to see the language bolstered further in the platform’s preamble.

“This is not as strong as past mentions of full employment in Democratic platforms going back several decades, where the fact that the Federal Reserve has a role in creating full employment is more fleshed out and a plan for how to get there is described,” he said.

The Fed Up activists also want to amend the platform to outline the Fed’s path to becoming a fully public institution.

By TARA JEFFRIES

Source

“One thing is evident at the core of the response,” said Ana Maria Archila, co-executive director at the Center for Popular Democracy and a part of the Power 4 Puerto Rico coalition. “There is a crisis of democracy. The federal government is acting as if the people of Puerto Rico are not constituents.”

Read the full article here.

JACKSON HOLE, WY – Last Thursday was the first time the most powerful financial players in the U.S. formally met with the people their policies affect. During the Federal Reserve Economic Policy Symposium at Jackson Lake Lodge, a meeting between the Fed and Fed Up sparked impassioned speeches that burned through barriers of language, culture, race, and socio-economic status. But the fervency expressed by Fed Up members seemingly had little influence on the Fed’s impending decision to raise interest rates, something Federal Reserve board chair Janet Yellen announced in her annual address the following day.

Still, members of Fed Up—a syndicate of the Center for Popular Democracy built around the ideology that the Fed’s policies affect people of every skin color and income bracket—were encouraged by the meeting.

Shawn Sebastian is the field director of the Fed Up campaign. “I think the meeting with the Fed was historic and unprecedented,” he said. “There are never that many Fed officials in the same room at the same time talking about monetary policy, and they’re certainly not doing that with low income people of color.”

Federal Reserve board leaders like Neel Kashkari, Lael Brainard, Esther George and board vice president Stanley Fischer all participated in the Fed Up roundtable.

The landmark meeting was the result of Jackson Lake Lodge overselling hotel rooms that Fed Up members had reserved. After the group filed several federal complaints, the Fed agreed to the sit down.

‘Don’t slow down the economy’

Echoes of agreement among Fed Up’s constituency rippled through the crowded room at Jackson Lake Lodge Thursday as the roundtable began. Members of Fed Up elucidated ideas of stagnant wages, unemployment, and underemployment that disproportionately plague people of color in the United States. Fed Up members explained how the Federal Reserve’s pending decision to slow down the economy by raising interest rates could damage already neglected communities. Nearly every speaker from Fed Up concluded with one central idea: Don’t slow down the economy. Not yet. Don’t hike interest rates. Not yet. Our communities are still underserved. Our people are still underpaid. Our unemployment rates are still nearly double the national average.

Esther George, chair of the KC Federal Reserve, responded to protestors with deference to Congress. “Our objective is to follow mandates of what Congress has made out,” she told the crowd. “The objective is not to slow down the economy; that would be irresponsible.” George continued by explaining that the objective of the Fed was to walk the balance beam between the ideal of full employment and the consequence of potential inflation due to an oversaturation in the job market.

Fed Up’s expert on economic forces, Josh Bivens of the Economic Policy Institute, said the Fed’s concerns about inflation should be adjusted in light of the impacts of the Great Recession. Bivens claimed a period of “overshooting” employment targets are necessary to heal the effects of that economic disaster, and that this period of overshooting is especially important to people of color, because it takes longer for their unemployment rates to catch up to national averages.

“[If] The Federal Reserve starts slowing the economy, it starts halting progress in reducing unemployment before the benefits of that reach the last people to be hired,” Bivens said.

Promising diversity

Fed Up seemed to impact members of the Federal Reserve Board on a few fronts. Several ambitious promises were made by members of the Fed, catalyzed by discussions held during the roundtable. Sebastian believes the most concrete impacts Fed Up had on the Federal Reserve were when Lael Brainard of the Federal Reserve’s board of governors committed to seriously considering a slate of candidates for board positions that more closely reflect America’s diversity. The board’s lack of diversity is a source of contention among Fed Up members, as the board is comprised of 16 white, predominantly male members. The only exception is Neel Kashkari of the Minneapolis Federal Reserve Bank, who is of Indian descent. Fed Up members are not the first to point this out, however. This summer a formal letter of complaint, signed by Bernie Sanders, Elizabeth Warren and some 127 other lawmakers, demanded the Federal Reserve open up to more diversity.

Another victory for the Fed Up campaign happened when Kashkari recommitted to an impressive research project studying racial disparities. Minnesota and Wisconsin, both states within Kashkari’s district, are rated the worst states in the country for black people to live based on a report by 24/7 Wall Street. Kashkari’s goal is to find the source of the disparities that propagate those statistics.

Blacks in Wisconsin face an unemployment rate of 21 percent which is more than quadruple the national average. Their incarceration rate is the third highest in the country, and their rate of home ownership is the tenth lowest. At a meeting earlier this month in Minneapolis, Kashkari sat down with Neighborhoods Organizing for Change to discuss the problem.

“Some of the racial disparities are a crisis, and we need to treat them like a crisis,” Kashkari said. “There’s something structural in the U.S. economy, in good times and bad, that black unemployment is almost always twice as high as white unemployment.”

However, in spite of all protestor efforts, in what is considered to be one of Federal Reserve Board Chair Janet Yellen’s most important speeches of the year, she explicitly stated that interest rate hikes were on the horizon. Yellen told the audience at Jackson Lake Lodge, “Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” PJH

By Natosha Hoduski

Source

In the center ring, Federal Reserve brass will be gathering for the closed-door conference that is hosted annually by the Kansas City Fed. Janet Yellen is skipping the event, as chairs of the board of governors occasionally do. The town, though, will be full of her critics.

On the right, the American Principles Project will host a separate parley on the need to reform the monetary system by restoring the gold standard as the best route to full employment.

In the left ring, a third group, called Fed Up, will argue for placing a priority on job creation. The Washington Post reports that the organization’s “teach in” will cover “income inequality, efforts to raise the minimum wage to $15 an hour and whether the Fed should invest in municipal bonds.”

The Fed and its critics will be gathering as a bill to establish a Centennial Monetary Commission goes to the floor of the House. The bill would establish a commission to examine the Fed as it begins its second century.

At the Fed’s conference—the theme is “Inflation Dynamics”— one speaker will be the Fed’s vice chairman, Stanley Fischer. Earlier this month, in an interview with Bloomberg News, he seemed to suggest that the dollar wasn’t losing value fast enough for the Fed’s taste.

MarketWatch headlined the interview as suggesting that a rate hike in September is “not a done deal.” The collapse of stock markets around the world in recent days, says USA Today, gives the Fed a “new excuse” not to raise interest rates.

No doubt Fed Up, part of the Center for Popular Democracy, will make the most of it. In addition to pressing for keeping interest rates near zero, the group is lobbying for more labor and consumer advocates on boards of regional Federal Reserve banks. Fed Up also wants easy money. “Fed policy has been too tight for the past 40 years,” Fed Up Director Ady Barkan emails me. “The commitment to keeping inflation low at all costs is what has led to the elevated levels of unemployment.”

The focus of the American Principles Project—with its gathering of economists, political leaders, bloggers and activists— will be less on what the Fed should do and more on whether central banks are the problem and how Congress should use its powers for reform.

I wonder whether there might be surprising convergence between the left and right camps. American Principles is also focusing on employment but sees as critical to job creation the return to a dollar that is an honest unit of account defined in law and backed by gold.

One of the group’s presenters, Marc Miles, is likely to report on a new study showing that higher interest rates correlate to job creation. Has the Fed pursued the wrong policies as it has used its mandate, legislated in 1978 with the passage of the Humphrey-Hawkins Full Employment Act, to boost employment?

When the law created the Fed’s so-called dual mandate by obliging the central bank to aim for full employment in addition to maintaining price stability, even the New York Times called the measure a “cruel hoax.” Considering whether to end the dual mandate is one of the questions that would be taken up by the Centennial Monetary Commission on which the House is preparing to vote.

So would the question of whether a rules-based system, such as that proposed by economics professor John Taylor, could solve the problem of fiat money that is not defined in law. Congress has already started looking at these matters.

Fed Chair Yellen has bridled at such ideas. Earlier this year she suggested that she would oppose any rule of monetary policy making. At Jackson Hole three years ago, then-Chairman Ben Bernanke warned Congress to, as the Drudge Report headlined it, “butt out” of interest-rate policy discussions.

The fear at the Fed is that Congress will politicize the formation of monetary policy. That strikes me as a weak line. The Constitution, which all Fed chairmen swear to support, grants monetary powers to Congress, precisely to the most political branch of the government.

We are approaching the end of a presidency that has been hobbled by an underperforming economy. No wonder the Fed’s most celebrated annual gathering is now bracketed by competing conferences that seek political reform of monetary policy. The big question is whether Congress and the presidential candidates are listening.

Source: Wall Street Journal Asia