On August 28, Bank of England economists Charles Bean, Mathias Paustian, Adrian Penalver, and Tim Taylor presented a paper to the Federal Reserve Bank of Kansas City’s Jackson Hole conference on monetary lessons from the recent crisis. They argue that raising the target inflation rate, as many economists have recommended, would be a bad idea and that central banks ought to lean against the wind and prevent destabilizing booms in the first place. Stanford economist John Taylor commented on the paper, criticizing it for underemphasizing the role of monetary policy in creating the crisis.
On August 27, Federal Reserve Board Chairman Ben Bernanke gave a speech at the Jackson Hole conference in which he outlined further options for dealing with the economic downturn. These include raising the Fed’s target inflation rate, additional quantitative easing, and reducing interest on bank reserves.
In an August 24 post, economist Scott Sumner argued that ultra low interest rates are less indicative of easy money than of tight money. In support of his argument, he cites a 1998 article by Milton Friedman regarding low interest rates in Japan.
On August 20, Brookings Institution economist Karen Dynan posted a commentary arguing that the Federal Reserve’s efforts to combat the recession clearly have not worked and it needs to employ measures that go beyond low interest rates, she says.
Also on August 20, Morgan Stanley economists Arnaud Mares and Joachim Fels posted a commentary suggesting that the Federal Reserve is likely to err on the side of preventing inflation even if deflation is really the problem because inflation is a problem it is more familiar with.
An August 19 analysis from Standard and Poor’s examined the possibility of deflation. Although the danger is real, the report says that it is unlikely.
In an August paper from the Networks Financial Institute at Indiana State University, economist Christopher Whalen argued that economic instability largely results from the Federal Reserve’s efforts to stabilize the Treasury debt market at the expense of the private banking system.
I lasted posted items on this topic on August 18.
Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He
blogs daily
and writes a
weekly column
at The Fiscal Times. Read his most recent column here . Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).