Fed Transparency

Chairman Bernanke this morning announced further steps in the Fed's long march toward greater transparency in monetary policy and gave the rationale for it.  Since each step toward greater transparency is almost always universally applauded by those to follow such things, I suppose they must be on the right track.  Everyone can't be wrong, can they?

        Yet, a little voice in my head keeps asking, rather pointedly if I may say so, whatever happened to the argument that an element of surprise is sometimes needed for the Fed to have a significant impact on the market. That was once conventional wisdom, but it's rarely articulated any more. In fact, I've only heard the surprise argument made once in the last several years.  Fortunately, from my point of view, it came from a cracker-jack economist for whom I have the highest regard:  Russell S. Sobel, an economics professor at West Virginia University and co-author of Economics: Private & Public Choice.

        When I sat around the FOMC table, I didn't actively resist steps toward greater transparency, but I did keep reminding my colleagues against going too far too fast, and that we may need an element of surprise some time. Since my more serious efforts bore no fruit, I wrote the following little poem and let it go at that. It's already on my web site under the "Rhymes with No Reason" section.  I reproduce it here for your convenience and enlightenment.

Translucence: Measured Transparency

Transparency is a current central banker cause  But it reminds me too much of sausages and laws I think translucence, like my shower door, is a good compromise

It lets in the light, but keeps out the flies.