Is the Federal Reserve on Twitter a Horrible Idea?

Remember that during the crisis of 2008 the Fed decided to "open the window," a move which allowed non-banks such as Morgan Stanley and Goldman to borrow (at virtually no cost) directly from the Fed to cover their suddenly dire cash needs. A Twitter account opens a new kind of window directly into the Fed, and who knows who might be looking in. It's not exactly news that social networks can be hacked. Just imagine what could happen if someone with sub-prime intentions got control of The Fed's twitter account for all of 15 minutes.

Worse than that, I wonder if it's a good thing to have the American public seeing, as they might through this new window, just what the Fed does and how it operates–and that it can more or less print money for any purpose at any time. People are already responding to the Fed's tweets. In fact, @ronsupportsyou responded to that second tweet about the structure of the Fed with the following: "I would like you to explain (to me and to other American savers) why interest rates that you set can't be a little higher." So, how do you answer that one, Ben? Or maybe you don't answer at all? But if you don't answer, what will the markets read into your lack of a response? I can only hope that the good people of the Federal Reserve have thought this through.

[Related: More columns from Adam Levin]

Transparency is an important element of a democratic government, but nobody would want a transparent CIA, and I'm not sure that anybody really wants a fully transparent Fed. Remember what Tocqueville said:


That was written– before radio, telegraphs, telephones, fax machines, the Internet, and of course Twitter–in the 1830s!

Note: The quote referenced above has been attributed both to Tocqueville and Alexander Tytler, though there appears to be some question as to who actually said or wrote it.



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