In the Fed, more than Trading Floor experiences, we need Main-Street experiences.

Sir, Mohamed El-Erian writes “Let’s not forget some market participants’ growing interest in modern monetary theory, including the view that persistently low yields enable higher central bank financing of government deficits. But such comfort risks being short-lived.” “Attacks by Trump risk damaging the Fed’s credibility”, April 12.

El-Erian leaves me a bit confused. Does he think the “modern monetary theory” could be any source of comfort even if short lived? I myself consider it a prime example of a dangerous fake theory, probably concocted by redistribution profiteers, and that because it offers such an “Easy Street” has simply gone viral. If we had any respect for Edmund Burke’s holy intergenerational bond, we should all do our utmost to destroy it.

Then El-Erian speaks of the need of the Fed to have a “‘feel’ for markets — that is… officials on the Federal Open Market Committee who have been properly and comprehensively exposed to operational responsibilities on trading floors.”

He is surely right that some of the members of FOMC should have that experience but, even more important than that is the experience from Main-Street, like when entrepreneurs want to access bank credit. 

Had there been just one single of those in the Fed, he would most surely have asked: “Colleagues, why do you set the risk weighted capital requirements higher for that which is perceived as risky, and which precisely therefore have such difficulties getting credit from the banks, and so therefore are quite innocous to our bank system?” 

Had that question been posed with enough firmness in requiring a clear answer, the 2008 crisis would not have happened and the world would definitely look better than now.

@PerKurowski