For years, libertarians and opponents of central economic planning have campaigned on diminishing the power of the Federal Reserve System and eventually abolishing it in its entirety. With the Fed as the most powerful entity in the world today, many have questioned if it could even be done.
Well, perhaps the central bank won’t be torn down brick by brick but perhaps the human element of the Fed – Alan Greenspan, Ben Bernanke, Janet Yellen – will, at least according to one software executive who discussed the possibility of the central bank becoming one giant computer program.
Vivek Ranadive, founder and CEO of Tibco Software, told CNBC on Monday that Wall Street will essentially depict Silicon Valley and that major financial markets will be controlled by computer programs. In the next couple of decades, banks might cease to exist and a bank in the future will be virtual and operated by big data and algorithms.
Although he believes the Fed has yet to embark upon the 21st century, Ranadive averred that the central banking system will be eventually be managed completely by a computer program. Rather than having the board of governors and the Federal Open Market Committee (FOMC) creating monetary policy measures, such as deciding what interest rates should be and how much money should be printed, a computer would make those decisions.
“I fully expect that the Fed will be displaced by a closed-loop computer program where you will constantly be making measurements and making adjustments based on what you’re experiencing,” stated Ranadive. “Wall Street should certainly look at Silicon Valley as a disruptor, as a potential threat. Every industry has the danger of getting Amazon’d, where the use of technology dramatically changes the value proposition.”
In addition, computers would be the arbiter of regulating and containing global pandemics, food shortages and transportation disasters. Also, computers would be the ones to offer liquidity and transfer capital to markets that need it.
Wall Street metastasizing into Silicon Valley could take place sooner than the year 2039.
Is this a satisfactory sacrifice for libertarians, Austrian theorists and the anti-Fed crowd? Despite the fact that the so-called smartest men in the room could be removed from the equation, there is still a central economic planning presence there with a supposed perspicacious of foretelling the markets. Rather than the likes of Yellen or Bernanke establishing interest rates, it would instead be performed by a central body, and in this case a machine.
What needs to be instituted instead is not more of the same but rather an end of central economic planning. Markets should be the factors deciding what interest rates should be, what the money supply rate is, what currencies survive and other dynamics related to monetary policy.
Remember, it’s not so much that Yellen and her cohorts are the problem, it’s the entire system itself that is deeply flawed and hurts the overall economy, households and savers. Forget converting monetary power from humans to technology. Rely on the market instead.