Tim Duy sums up the difficult position the Fed is in:
The world as it is, alas, is far from perfect. It is simply easier to lower than to raise rates. And I suspect this is especially the case this time around, as even if inflation pushes higher a tepid economic environment – the best that even Fed officials see emerging on the other side of this slowdown – makes meaningful rate increases politically difficult. And, as I argued last time, any rate increases are effectively off the table for the foreseeable future, as Bernanke cannot offset the fiscal stimulus he supported and largely designed.It is increasingly obvious that the Fed is in a no-win situation. The best case scenario for the Fed is that nominal wage growth is kept in check by a deteriorating labor market. This will help contain inflation expectations and prevent a more serious 1970’s type of environment. But overall, Jim Hamilton is correct; they are unable to both contain inflation and prevent a significant economic downturn
I am, as econbloggers go, extremely forgiving of the Federal Reserve. I think what is obvious in hindsight is rarely so clear in prospect, and that our Fed chairmen of the last few decades have in general done a remarkably good job of balancing output and inflation.
It is time, however, to turn off the taps. Recessions are bad, but not nearly as bad as things will be if the Federal Reserve squanders nearly thirty years of hard-won credibility on inflation in a futile attempt to prevent oil scarcity from reducing output.
Keep the taps full on FED. This is all about starting manufacturing back up in North America. Asia has had 30 years of growth on the backs of the US comsumer. Time to reverse the flow. Don't give me the they-are-poor crap. They can find all the money they need for atomic bombs and missiles. Lets get an obesity problem going in China.
I'm no expert on monetary policy (so someone correct me off I'm wrong).
But doesn't monetary theory hold that the most effective rate cuts only occur when it's a surprise. If everyone anticipates a rate cut (as say do now), then it won't be very effective to spur real growth.
Burnanke is too transparent.
Yeah, central bankers have a bitch of a job. How about 15 percent inflation, a stock market down almost 50 percent from its highs last year, and a government policy of keeping the currency from appreciating against the rapidly falling dollar because exports to the US are what drives your economy, thus forcing the State Bank to buy huge amounts of dollars, ballooning the money supply and feeding the inflationary cycle?
http://www.earthtimes.org/articles/show/189831,analysis-inflation-monetary-policy-holding-back-vietnam-investors.html
Reagan had three great accomplishments:
He restored the credibility of US prestige and the US military presence;
He changed the growth rate of government spending relative to GDP;
And he (with Volker) killed the inflation of the 79-82 period, which had been a growing threat since the 60s.
With the return of inflation and the politics of low interest rates, Bush has officially undone all of Reagan's accomplishments.
I admire Reagan, but credit for Volcker has to go to Carter, who appointed him . . .
Sounds like we need to keep our eye on the ball and get Iraq's oil production up and running. Whether we steal it or not, we need to get Iraq producing oil that is available on the world market.
I'm doing my part by designing deepwater drilling systems... what are YOU doing?
http://www.kitco.com/LFgif/au00-pres.gif
Too late.
"I am, as econbloggers go, extremely forgiving of the Federal Reserve."--MM
Sure, why not?
Let's run a productive Economy based on totally fictional units of account...is it, really, any wonder that 'price' volitility, throughout the Economy, has been of growing amplitude since the inception of the FedRes(?)
Let's run a productive Economy based on totally fictional units of account...is it, really, any wonder that 'price' volitility, throughout the Economy, has been of growing amplitude since the inception of the FedRes(?)
Sure, let's run a productive eCONOMY based on a meaningless sop standard that prevents us from having significant amounts of credit available in the face of unexpected expenses...it is, really, any wonder that 'overall' volatility, throughout the eCONOMY, has been of reduced amplitude since the inception of the FedRes(?)
Is eCONOMY some special financial term I'm unfamilar with, anony?
Oddly, a price-wage inflation spiral would be good for me personally. I don't think I can give it my approval as a policy though. If the fed wants to do me a favor, they should just send me a briefcase full of money. That would cause less collateral damage.