Comments for What Part of the Fed Fulfilling Its Mandate is "Delicate?" at http://www.cepr.net , comment 1 to 7 out of 7 comments http://www.cepr.net Thu, 23 May 2013 09:24:42 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18518 Politics certainly has a potential effect on how the Fed operates. Bernanke's term is up in January 2014, so any promises he might make about inflation target, etc. are only operative for a limited time. Contrary to what you might think from reading Baker and Krugman, Bernanke has presided over by far the biggest deliberate effort to expand the money supply in history (outside of war spending), and federal funds rate is lower than ever before - and has been for 2 1/2 years. This may have prevented actual deflation and kept the recession from being worse, but on the other hand it obviously did not prevent a bad recession and the main effect of the buying programs including QE seems to have been to bloat bank reserves. All this was done over the objections of many conservative politicians and even some members of the Fed itself; if Bernanke was determined to please conservatives his actions would have been completely different. People like Baker and Krugman who claim (correctly I think) that demand is the problem should not be wasting time and effort vilifying the Fed for doing exactly what it was supposed to do according to their philosophy. - skeptonomist Fri, 31 Aug 2012 08:36:12 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18499 Pete, what you say is true, but the idea that the "unemployment" part of the dual mandate somehow led to inflation post-Bretton Woods is just weird. In the real world, post-Bretton Woods, post-70s is just when the Fed & much worse, everyone else, the Congress, the Treasury & the people decided to ignore unemployment. And "economists" decided to erect the temple of unKnowledge, the clown college, called modern mainstream economics. Having forgotten the Great Depression, full employment was abandoned worldwide, leading to the Great Stagnation called "The Great Moderation". If anything the interest rate increases (mis)targeting the anti-inflation mandate - and ignoring the unemployment mandate, were inflationary over this long run. - Calgacus Thu, 30 Aug 2012 18:42:53 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18490 I vote we make Scott Sumner fed chairman and at least try NGDPLT. - Floccina Thu, 30 Aug 2012 10:23:17 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18482 When JPMorgan created the Fed by stealth in 1913, the whole idea was providing stable bank earnings so he didn't have to bail out idiot or unscrupulous bankers. It is indeed run by the banks, certainly not democratic, and that's exactly the way JP designed it. Somehow in the later half of the 20th century monetary policy began to be thought of as a great macro tool, ignoring the design of the Fed. We've had several housing booms and busts, a dotcom bubble and crash, and a doubling of the inflation rate during the dual mandate-post Bretton Woods era. Hard to call that successful...I don't think JP designed the Fed for this purpose. Activist monetary policy (with repeated failures) merely adds additional uncertainty into an already risky economy. - pete Thu, 30 Aug 2012 07:04:00 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18472 That "Delicate" comment is especially ridiculous in light of an election never being more than just a few months distant. - Bart Thu, 30 Aug 2012 01:27:50 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18469 the point of the fed is maintaining as much control over monetary policy by bankers as possible. the story about political independence is a cover story for the anti-democratic structure of the fed. - Tom Thu, 30 Aug 2012 00:51:31 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/what-part-of-the-fed-fulfilling-its-mandate-is-qdelicateq#comment-18465 Isn't the reason the FED is set up to handle monetary policy independently of Congress and the President, minimizing politics in monetary policy? After the president appoints the FED chair, isn't he/she supposed to just follow the mandate with as little regard to politics as possible? - Robert Salzberg Thu, 30 Aug 2012 00:19:25 +0100