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Showing posts from October, 2013

Monetary policy? Child’s play

The promise made a century ago that the U.S. central bank would eliminate economic crises is not raised very often.  To raise it would question the need for government’s most untouchable monopoly.  So it is not raised.  The Fed is the heart of the economy, we often hear.  It is the government’s ATM machine.  It bails out the big players when the roof caves.  It’s ridiculous to think the government could “do something” about crises without massive amounts of money at its disposal.  

Today, the Fed is stronger than ever as a result of the financial crisis of 2007-2008, the biggest since its other major failures, the artificial boom of the late 1920s and its role in the Great Depression, and the stagflation of the 1970s.  The Fed’s twin mandates of keeping inflation and unemployment low has been only half-successful.  According to one line of thought, the Bernanke Fed’s policy of buying close to $1 trillion a year in government debt may be too moderate to ease the pain of unemployment.  …