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Home Publications Blogs Beat the Press Leonhardt Nails It on the Fed

Leonhardt Nails It on the Fed

Sunday, 28 August 2011 07:58
David Leonhardt has a great piece outlining the battle over Fed action and the way it is affected by outside pressures. It is well worth reading.
Comments (4)Add Comment
written by skeptonomist, August 28, 2011 10:27
Leonhard quotes Larry Summers as being "dispirited" by the Fed's lack of action. Actually, the Fed has done about all it can do; it began to drop interest rates at the first sign of trouble in mid-2007; it has gone through two rounds of QE; and it has been promising all along that it will not begin to tighten for varying long periods of time including "the foreseeable future". Too bad that the commitment to fiscal action has been slight in comparison.

Maybe if Summers and the other economists referred to by Leonhard as "doves" had not put so much faith in the powers of the Maestros to prevent or reverse recession, they would have pushed harder for more adequate fiscal stimulus in the beginning. Now they (and Summers in particular) are passing the buck to the Fed.

Bernanke is not so much subject to actual political pressure as pressure from within the Fed. What else would you expect from an organization of big bankers? Considering that Bernanke was appointed by the Bush administration and therefore must have been known to be sympathetic to big finance and banking, he is doing pretty well in resisting the pressure to actually start tightening.
written by argeec, August 28, 2011 2:11
Whoa there Dean!

That was not a great column. Leonhardt didn't even mention Bernanke's pleas for fiscal action from congress and Obama, which have been louder than ever before from a Fed chairman. And the conversation among economists as to whether the Fed should do more or less is like arguing about using one or two squirt guns to put out a raging house fire.
written by liberal, August 28, 2011 2:28
I agree with skeptonomist. I suppose there are always radical approaches that might work, but it's hard to see what more the Fed can do.
written by AlaninAZ, August 28, 2011 7:47
I suggest that skeptonimist read the article again. Larry Summers is really Scott Sumner. It was a good piece.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.