The optics make me smile.  There is a little, old grandmother with white hair sitting at a table alone, facing off with a panel of men who question, sometimes rudely, everything she has done and everything she plans to do.  Those are the optics for the twice yearly testimony of the Fed Head before the separate houses of Congress.  The best part is that she holds her own quite nicely.  She answers intelligent questions with added intelligence and expertise.  She answers lame questions with graciousness.  She answers threats with simultaneous over-talking.  She is an excellent economist.  (Indeed, she is married to another economist and the mother of still yet another.)  She has far greater economic expertise than anybody questioning her.

But, does she need to be an economist?  Because the stock market tends to over-react to most everything the Fed does, she might need a public relations background more than an economics background.  Anybody who can spell F-E-D knows they are planning to raise interest rates sometime within the next twelve months or so.  The PR problem is that bonds adjust to “end-pricing” as well as current pricing.  Remember:  the price of bonds drops when interest rates rise.  She may only raise rates by a quarter-point but bonds could drop enough to justify a full-point rate increase.  His mission is to convince the bond market that the Fed will only raise interest rates slowly and not too much.  If the bond market doesn’t believe that, the bond market will tank scarily.  The Fed can easily lose control of interest rates if that happens.  Unfortunately, media management is not taught to economists.

But, does she need to be an economist plus a media manager?  Because the Fed is such a powerful agency, those who fear everything about the notion of government, particularly Libertarians, want increased supervision of it.  Senator Rand Paul has again introduced legislation to “audit” the Fed.  What could be wrong about that?  We certainly don’t want anybody stealing money from the Fed, do we?  I’m trying to recall how many different audits the Fed already conducts each year and seem to recall the number is twelve, with the reserve banks being audited separately.  In general, Senator Paul wants to audit how the decisions to change monetary policy are made.  In particular, he wants to make sure that Austrian economics is used to the exclusion of other economic approaches.  This is a crazy idea, and I wish him no luck with this legislation.  But, the Fed Head must stand up to her full 5’2″ and stop his legislation.  She needs to be a lobbyist to protect the independence of the Fed from partisan interference.

But, does she need to be an economist plus a media manager plus a lobbyist?  Yes!