Streetwise Professor

September 27, 2011

The FRBNY Goes Able Danger?

Filed under: Economics,Exchanges,Financial Crisis II,Politics,Regulation — The Professor @ 9:34 am

When I was in London last week, I went to a cafe that is located in what used to be the trading floor of the London Stock Exchange.  History-phile that I am, I thought I would take a picture of the quite attractive building.  I had my phone cam up and was just about ready to take the shot when I felt a burly hand grab my shoulder, and heard a gruff voice–“No photographs ‘ere, sir.”

I thought this ironic, given that one is photographed pretty much everywhere on the street in London.  They can photograph you: you can’t photograph Them, I guess.

This came to mind when I read about the NY Fed’s plan to monitor “key bloggers” and various social media (Facebook, Twitter, etc.) for conversations mentioning the Fed.  More ominous than the passive “listening” part of the program is the active “influencing” part, intended to “identify and reach out to key bloggers and influencers.”

“Reach out” sounds so innocuous.  Brings to mind old ATT ads: “reach out and touch someone.”  But there is always reason to be concerned that the Fed’s touch will not be a light one.  We don’t need the government doing much more outreach and “influencing”, thank you very much.

I’m not big on conspiracy theories, but the potential for mischief here is large, especially given the government’s (and the Fed’s) proclivity to rationalize ever greater intrusions on privacy and liberty as essential for national security.  One can see the Fed convincing itself that to fight “rumors” and “speculation” that call into question the stability of the financial system, it is necessary to exert pressure on those that need to get their minds right, to make sure they get with the program.

This was illustrated by an interaction with an executive from a major French bank that has been in the news of late (which one hasn’t?) who went ballistic when someone else in the conversation asked what financial blogs I read, and I mentioned FTAlphaville and heaven forfend Zerohedge.  I mean ballistic. The Gallic spit was flying before  he turned on his heel and left in a huff.

Yes, there are potentially multiple equilibria in these markets, and social media and blogs can in theory coordinate shifts from good equilibria to bad (“run away!”) equilibria.  But it is quite ominous that the Fed appears to be contemplating the creation of systems and measures that could be used to manipulate information flows.

Hey.  Maybe I’ll ask Ben about this when I see him next week.  Maybe that’s a great way to get SWP at the top of the list!

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  1. I am concerned about government intrusion as well; however, has the Fed traditionally monitored and “reached out” to reporters? I suspect that they have. Perhaps your French bank executive would have turned and left in a huff if you told him that you read IBD. If blogs are taking the role that was traditionally served by reporting, shouldn’t those being reported upon respond?

    Comment by Highgamma — September 27, 2011 @ 10:44 am

  2. Wait, did Ben already get to you and “influence” you to talk about Zerohedge? I don’t know though, that doesn’t make any sense at all at first glance… but if you dig deeper maybe this is like when they turned Coburn on TARP. A fancy scheme to get me saying, “Well if SWP and Zerohedge say its OK…” It won’t work. I’m on to you.

    Comment by ThomasL — September 27, 2011 @ 11:58 am

  3. @ThomasL–curses, you saw through our fiendish plot.

    The ProfessorComment by The Professor — September 27, 2011 @ 12:47 pm

  4. @Highgamma–when the Frenchman went non-linear about Zerohedge, and the “rumors” it was spreading about his bank, I did mention that I had read similar reports in the WSJ, but was responding to a question about blogs. He didn’t respond to the WSJ reference at all.

    I’m sure they reach out to reporters. All the time. I understand new media like blogs and social networking sites pose new issues and confuse old boundaries, and they have some important similarities to traditional sources of information and opinion. However, I would point out that these new media do not have the same institutional and legal protections as traditional media; do not have the same resources at their disposal as do traditional media to resist (perhaps legally) undue pressure; and are much more broadly representative of the individual citizenry. Thus, I think that there is a much greater risk that a government influence program could threaten individual free speech rights, or be used to carry out information operations.

    Given the more demotic nature of blogs and social networking sites, I consider this proposal to be quite unsettling.

    The ProfessorComment by The Professor — September 27, 2011 @ 1:06 pm

  5. If you have a chance ask Ben if they require a super computer system to keep up with their current level of money creation. I know the IBM system “Blue Gene” is quite powerful. Maybe the Fed also has an endearing nickname for their system like Sawbucks or Tera Green.

    Comment by pahoben — September 28, 2011 @ 11:48 am

  6. ZH reader? Nevermind it’s one of the top 1,000 U.S. sites, you’re clearly a terrorist.

    Comment by Mr. X — September 28, 2011 @ 4:08 pm

  7. I read ZH for the first time today. Jeez, I need to get back to digging my bunker.

    The post about the Greek tax authorities not mailing out tax claims for ten days because they were out of ink was priceless.

    Comment by pahoben — September 28, 2011 @ 5:38 pm

  8. @pahoben & Mr. X . . . Zero Hedge is aptly named: it’s high variance, so it’s obvious they don’t hedge. You really need to filter the content. Lots of type I and type II errors in what’s posted there. But it does tend to have some interesting tidbits first.

    And I’m not a terrorist. I’m a barbarian son-of-a-bitch. Just so we’re clear.

    The ProfessorComment by The Professor — September 28, 2011 @ 5:57 pm

  9. understood-thanks

    Comment by pahoben — September 28, 2011 @ 6:58 pm

  10. Of course they are going to “reach out” but the aggressive acts probably brought on by a real fear than paranoia: that clown Barney the large purple dinosaur/congressman is trying to get the local Fed Presidents off the OMC, again. I guess their interference in the brilliant economic planning and policies he has helped inflict on us bothers the old pederast, and certainly scares the local Fed Presidents.

    Looking at this gang reminds me of my (Sotos’) fourth law: There area lot of situations where everyone is wrong.

    Comment by Sotos — October 1, 2011 @ 5:55 pm

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