Global Crisis/Innovation Blog

Diamond? Who Needs Diamond?  We Have Coal! Republicans Hurt America – Again!

By Shlomo Maital

MIT Prof. Peter Diamond, Nobel Prize 2010

 There are two vacant positions on the Federal Reserve Board of Governors, out of seven. At a crucial time when Fed policy needs all the brainpower it can get, the Republicans have stymied the appointment of MIT Professor Peter Diamond, Nobel Laureate, to the Fed.  Sick of the hassle by the Senate Banking Committee, led by Republican Senator Richard Shelby, Diamond withdrew his candidacy. 

  Why were the Republicans opposed to Diamond?   Well, for one thing, he’s a dove – favors strong government intervention to strengthen labor markets.  Why did they SAY they opposed him?  He has no experience in monetary policy – he’s only one of the world’s top experts on job markets. 

   Let’s get this straight. America’s #1 problem, according to EVERYone right now, Democrats and Republicans, is jobs.  Writing in today’s Global New York Times, Crystia Freeland (“Getting by without the middle class”) notes these distressing numbers: 

* 14 m. Americans, or 9.1 % of the workforce, are unemployed;

* 8.5 m. would like to work full-time but can only find part-time work.

* Another 2.2 m. are so discouraged, they have quit looking for work altogether.

* Those actively looking for work have been unemployed for an average of 39.7 weeks. 

   Freeland argues that these data “depict an unemployment crisis that is deeper and more sustained than at any time since 1948, when records first started to be kept.”

    With America’s budget deficit out of control, the only body able to do anything about the job crisis is the Fed.  So – why appoint the world’s top expert on job markets?  Why go for Diamond?  We have ‘coal’ – Board of Governors members who only understand monetary policy, which so far has been highly ineffective.   Commenting on Britain’s Monetary Policy Board, economist David Blanchflower says, “Monetary policy committees have a huge problem of institutional groupthink. If every member is from the central bank they tend to think in narrow monetarist terms. External members bring a sense of balance, they are in touch with the world of business and work, and they question what is being said in the bank.”  (The Economist, June 7, 2011).

     Let’s salute the Republicans.  Their strategy of destroying America, so they can do better in the 2012 Presidential election by blaming Obama, is working.  What is amazing is that millions of Americans are actually going to vote for them.