The View From 1776
Thursday, January 12, 2012
Managing The Economy
The Federal Reserve, among other things, is charged with managing the economy to prevent unemployment. Recently released transcripts of Fed meetings in 2006 demonstrate that even a well-informed elite group of regulators cannot do the job.
The Fed failed completely to foresee the 2007-2008 housing meltdown and the collapse of the financial system. The Fed failed completely to foresee the dot.com boom-and-burst that threw the economy into recession at the end of President Clinton’s tenure. The Fed failed completely to foresee the stagflation of the 1970s (it was, in fact, proclaiming its success at fine-tuning the economy using Keynesian economic tactics). The Fed pumped up the money supply sharply during the 1920s, failing completely to foresee the 1929 stock market crash and the Great Depression.
The following excerpts from an article in today’s Wall Street Journal bring us up to date on the dangerous folly of allowing the Fed to attempt management of the economy, particularly when it espouses the Keynesian belief that financing the government’s deficit spending will automatically end a recession without inflationary distortions to people’s standards of living.
Federal Reserve Chairman Ben Bernanke and most of his colleagues showed little concern when house prices started to decline in 2006, predicting