Post by johnsmith on Sept 6, 2022 18:54:37 GMT
I have been listening to all sorts of people complain about the Fed and it's policies for years now, and I think they are mostly rubbish!
IMO - The problem lies with the politicians, congress, whitehouse and senate.
When there is an economic crisis, there are two ways to deal with it as Keynes taught us: Fiscal and Monetary policy. The US had abandoned (pre-covid) all fiscal policy for political reasons and only used Monetary policy.
The fed controls monetary policy and can only effect so much with it, there are times when proper fiscal policy needs to be implemented; so with one hand tied the other had to do all the work, causing imbalances.
When covid hit, Powell went to congress and said that the government had to implement fiscal policy otherwise disaster would strike, and he was correct. This was one of the few times, I can ever remember, a Fed chairman going in front of congress and said - spend!
Current criticism is that Fed kept interest rates low for too long; I think the fed was correct to do so as the economy was still fragile. Deflation or disinflation was a problem for so long that the Fed had to say that we want inflation and we will do anything to get it up to 2% over the long term (people seem to quickly forget when many places had -ve rates and the US seemed to be quickly following there). This wasn't so far back that people should forget!
The current inflation situation is multi-pronged IMO and has more to do with Supply, Competition Issues (needs to be dealt politically) than monetary issues. Therefore the solution lies in the political realm than with the FED. Therefore most FED criticism is rubbish!
