Focus on Monetary Policy

Focus on Monetary Policy

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In a December 7 commentary, University of Chicago economist John Cochrane was highly critical of the Fed’s policy of quantitative easing. He argues that the impact amounts to little more than shortening the term structure of outstanding Treasury debt.

In a December 6 blog post, Bentley University economist Scott Sumner was highly critical of what he views as a grossly ignorant Forbes column by the Cato Institute’s John Tamny, which argued that it is a mistake for the Federal Reserve to aim for price stability. Citing Karl Marx in support of his view, Tamny thinks monetary policy should be guided solely by changes in the price of gold and nothing else.

Also on December 6, the Federal Reserve Bank of San Francisco published a study examining various measures of inflation. All show very low inflation and none give any indication that it will rise in the near future.

And on December 6, the International Monetary Fund published a working paper showing that world stock markets and hence global capital allocation react to changes in U.S. monetary policy.

On December 3, the Bank for International Settlements published a working paper that compared central bank policies in the early 1930s to the recent crisis. It finds that the gold standard severely limited their ability to create liquidity, thus leading to a long and deep economic downturn. By contrast, central banks created liquidity freely in the recent crisis, which significantly limited its spread.

In a December 2 speech, Federal Reserve Bank of Philadelphia president Charles Plosser expressed skepticism that the Federal Reserve’s recent policy of quantitative easing would be very effective at stimulating growth.

In a December 1 commentary, conservative economist David Beckworth explained why conservatives should support the Federal Reserve’s policy of quantitative easing.

In a November 30 article, Stanford economist John Taylor and Congressman Paul Ryan urged that Congress reform the Federal Reserve to make price stability its only responsibility and prohibit it from taking an economic crisis or high unemployment into account when formulating monetary policy. Taylor commented further in a December 1 blog post.

Writing in the November issue of The Freeman magazine, economist Jeffrey Rogers Hummel has an article explaining why the government does not benefit from inflation as it did in the past.

I last posted items on this topic on December 2.

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).

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.