Tag Archives: The Fed

The Floundering Federal Reserve

Meltzer 3Dr. Allan H. Meltzer is an American Economist and the Allan H. Meltzer professor of Political Economy at Carnegie Mellon University’s Tepper School of Business. He is the author of a large number of academic papers and books on monetary policy and the Federal Reserve Bank. Dr. Meltzer’s two volume books, “A History of the Federal Reserve”, are considered the most comprehensive history of the central bank.   He is considered one of the world’s foremost experts on the development and application of monetary policy. Currently he is also President of the Mont Pelerin Society. Dr. Meltzer originated the aphorism “Capitalism without failure is like religion without sin. It doesn’t work.”

This is a monthly column written by Professor Meltzer for Defining Ideas of the Hoover Institution.

It is posted in   http://www.hoover.org/research/

In late August, I again spent 3 days with central bankers from all over the world at the annual meeting sponsored by the Kansas City Federal Reserve Bank. The spectacular, scenic beauty at the Grand Teton National Park, Wyoming, is one of the world’s most beautiful places. The meetings attractions include stimulating discussions of economic policy in addition to the spectacular scenery and wonderful hiking.

This year’s central topic called on participants to discuss ways to improve future monetary policy operations. A major concern is about ability to respond effectively to a recession if the current low interest environment continues. Central bankers have learned to lower interest rates to encourage borrowing in recessions and to raise rates when inflation threatens or occurs. Because interest rates are close to zero in all the developed countries, some market participants fear that central banks will be powerless to act. Chair Yellen tried to reassure them.

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Fed Up with the Fed

Meltzer 3By Allan H. Meltzer who is an American Economist and the Allan H. Meltzer professor of Political Economy at Carnegie Mellon University’s Tepper School of Business. He is the author of a large number of academic papers and books on monetary policy and the Federal Reserve Bank. Dr. Meltzer’s two volume books, “A History of the Federal Reserve”, are considered the most comprehensive history of the central bank.   He is considered one of the world’s foremost experts on the development and application of monetary policy. Currently he is also President of the Mont Pelerin Society. Dr. Meltzer originated the aphorism “Capitalism without failure is like religion without sin. It doesn’t work.”

This is a monthly column written by Professor Meltzer for Defining Ideas of the Hoover Institution.

It is posted in
http://www.hoover.org/research/fed-fed-0

After the unprecedented financial events of the past decade, several Congressmen and Senators recently proposed steps to rein in the Federal Reserve’s broad powers over monetary policy and commercial bank regulation. Like many of their constituents, the authors and supporters of the new rules are fed up with both Fed bailouts of large banks and the financing of government deficits at historically low interest rates.

The proposed changes would require the Fed to announce and follow a rule for monetary policy and stop using taxpayer funds to bailout large banks and financial firms. Both changes are welcome and long overdue.

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Janet Yellen: No Equity Bubble, No Real Estate Bubble, And No QE Taper Yet, (by Agustino Fontevecchia, Forbes Staff)

220px-Janet_Yellen_official_portraitJanet Louise Yellen is an American economist and professor who is the Vice Chair of the Board of Governors of the Federal Reserve System. Previously, she was President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, Chair of the White House Council of Economic Advisers under President Bill Clinton, and Professor Emerita at the University of California, Berkeley‘s Haas School of Business. On October 9, 2013, President Barack Obama nominated Yellen to be Chair of the Federal Reserve. If confirmed, Yellen would be the first woman to hold the position

This report was posted in Forbes on November 14 2013.

In her first public appearance as nominee to succeed Fed Chairman Ben Bernanke, Janet Yellen faced the Senate Banking Committee, reiterating her intention to keep the monetary spigots wide open while rejecting the notion that we are seeing asset bubbles as a consequence of quantitative easing. Yellen noted there is “no set time” for tapering, implicitly admitted the Fed lost control of the market during the summer so-called taper tantrum, and agreed that investors buy gold to protect from “catastrophe.”
“It could be costly to fail to provide accommodation [to the market],” Yellen told Senators on Thursday, making it clear that she is a staunch supporter of quantitative easing and ultra-loose monetary policy. “This program can’t continue indefinitely,” she also added, noting the longer we have QE the greater the risk for financial stability, “and I look forward to leading when the time is appropriate for normalizing.”

Yellen, who has served at the Federal Reserve “at different times and in different roles over the past 36 years,” confirmed she shares Ben Bernanke’s convictions.  A dove within the FOMC, Thursday hearing makes it clear that under Yellen, the Fed will continue in the same path activism and increased communication.

Her style, in terms of public speaking, differs dramatically from Bernanke, who at times was confrontational and assertive.  Yellen is soft spoken and chooses to deconstruct every argument, answering every point from a technical perspective.  After giving some creed to other opinions, though, she will stand her ground, as when she acknowledged QE hadn’t been perfect, yet it has made “a meaningful contribution” to economic growth, particularly creating a wealth effect and boosting the housing and the auto market.

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