Shadow Open Market Committee - SOMC

In the shadows...in the open...they’re everywhere: the Shadow Open Market Committee (SOMC).

This independent group of econ professors was created to provide a legit (but opposing) view to the status quo currently reigning the Federal Reserve (U.S. central bank). The status quo is very bastardized-Keynesian-esque. The TL;DR there is getting people to spend, spend, spend. Spending is what keeps growth...growing.

In good times, they’re already spending, so the Fed can keep interest rates high. In bad times, they’re saving much more than they’re spending. When unemployment goes up, recessions happen. People are saving, not spending. In order to get them to spend, the Fed will lower interest rates. Maybe Congress will throw in a stimulus package, or maybe the Fed will also increase the money supply (though that could lead to inflation if done without finesse).

The SOMC is a group of education econ nerds who would like to propose more of a Milton Friedman view, rather than a Keynesian one. There’s no debate that they’re both big in economic history, and for good reason. For instance, the SOMC believes that inflation is purely a monetary phenomenon...and the Fed controls the money supply. Thus, if the Fed says inflation is the fault of other market forces, the SOMC is there to say “Nah, man. It’s not the economy that’s making the inflation; it’s you.”

This Fed watchdog and Friedman-vision group meets on the reg, discussing monetary policy, fiscal policy, and even trade policy.