- What are the Fed's objectives, and how is it trying to meet them.
- What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
- What is the risk that the Fed's accommodative monetary policy will lead to inflation.
- How does the Fed's monetary policy affect savers and investors
- How is the Federal Reserve held accountable in our democratic society?
Board of Governors of the Federal Reserve System
Five Questions about the Federal Reserve and Monetary Policy
Chairman Ben S. Bernanke At the Economic Club of Indiana, Indianapolis, Indian October 1, 2012
Five Questions about the Federal Reserve and Monetary Policy
Chairman Ben S. Bernanke At the Economic Club of Indiana, Indianapolis, Indian October 1, 2012
5 comments:
Bernanke claims “the Fed acts to reduce interest rates, which supports the economy by inducing businesses to invest more”. Complete hogwash.
1. At the start of a recession, there is a SURPLUS of capital equipment, thus more investment is exactly what is NOT NEEDED. (Doh!).
2. There are a HUGE NUMBER of costs associated with any capital investment, e.g. energy costs, depreciation, labour costs, etc. A 2% change in the interest paid is near irrelevant.
3. In a genuine free market there would be a market determined rate of interest, which in theory would optimise the amount of investment. If that rate is manipulated, the amount of investment will not be optimised.
4. The idea that there is a relationship between CB rates and the actual availability of credit is a joke: in the UK at least, banks are currently very reluctant to lend to businesses despite low rates.
5. There is no relationship between CB rates and credit card rates.
6. We’ve just been thru a credit crunch caused by excessive and irresponsible borrowing. And what to CBs do? They cut interest rates so as to encourage more borrowing. CB governors need psychiatric treatment.
The moral is that the solution to recessions advocated by Abba Lerner (which I think is supported by most MMTers) is far better: just create new money and spend it into the economy (and/or cut taxes).
And perhaps the best way to spend that new money into the economy is through a Job Guarantee which would put that money in the hands of those with the highest propensity to consume.
The kid in the backseat explaining how his toy-steering wheel works.
Both - fiscal and monetary policy are political matters in real democracy.
What I got out of Bernanke's speech is that he twice called on Congress to put the budget on a "sustainable path."
True, he took a "deficit dove" approach, but he still oozed deficit-phobia.
The Fed could and should use its bully pulpit to educate the public about how our money system works. Instead, Bernanke spews old wives' tales.
+Dan Lynch said:
The Fed could and should use its bully pulpit to educate the public about how our money system works. Instead, Bernanke spews old wives' tales.
This is what I don't understand about the Fed, why can't they come out and tell the truth about how the currency system works. What's stopping them? Is it ignorance or willful deception?
Once in awhile they slip out the truth, like Bernanke in that 60Minutes tape and the St. Luis Fed article.
Either way they are destroying the nation and should be held responsible for it.
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