Driverless Fed

19 Oct

If historical correlation means anything, then President Trump would be best served by appointing either Peter Dinklage or Robert Reich as the next Fed chairman. The perfect correlation between the Federal Funds rate and the height of the sitting Fed Chairman/Chairwomen is  incontrovertible. While one might argue that this relationship is spurious at best, you can’t argue with the numbers and as we all know, numbers don’t lie. In fact, as the world moves toward more autonomous modes of transportation, it would make complete sense to move towards a Central Bank that is purely driven by data, with no human interface or objectivity. Under this new Central Banking model, all monetary policy would be derived from a model (dot plot?) with the input derived from the usual suspects of: consumption, inflation, capital market environment, etc.. The advantages of such a model are many, not least of which is that such a model reinforces the political neutrality of the institution. We find it curious that with all the advances in AI and process technology, no real conversation has taken place regarding the mechanization of monetary policy decision making. Trillions of dollars slosh around capital markets daily driven by highly sophisticated algorithms, but we suspect that the public takes some false comfort in the fact that there are 12 people that are “in control” of the domestic and global financial system. Driverless cars- sure, Driverless Fed- too risky.

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