Comments on: Monetary Policy, the Seen, and the Unseen http://taxesandbudget-blog.ncpa.org/monetary-policy-the-seen-and-the-unseen/ Insights on Taxes, Economic Policy, Federal Budget | NCPA Fri, 20 Nov 2009 19:34:42 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: Bob McTeer’s Blog » Blog Archive » Stimulus and Job Creation http://taxesandbudget-blog.ncpa.org/monetary-policy-the-seen-and-the-unseen/comment-page-1/#comment-9450 Bob McTeer’s Blog » Blog Archive » Stimulus and Job Creation Wed, 18 Feb 2009 21:22:02 +0000 http://www.bob-mcteer-blog.com/?p=129#comment-9450 [...] explained in my Broken Window Fallacy, when a baker has to spend money for a new window because teenagers threw a brick through the old [...] [...] explained in my Broken Window Fallacy, when a baker has to spend money for a new window because teenagers threw a brick through the old [...]

]]> By: Don the libertarian Democrat http://taxesandbudget-blog.ncpa.org/monetary-policy-the-seen-and-the-unseen/comment-page-1/#comment-7102 Don the libertarian Democrat Fri, 17 Oct 2008 03:43:04 +0000 http://www.bob-mcteer-blog.com/?p=129#comment-7102 Here's an example going forward: The Fed And Bubbles Justin Lahart with an excellent post on the WSJ about the Fed trying to avoid bubbles in the future: http://online.wsj.com/article/SB122420268681343047.html "Once authorities identify a bubble, the next step is figuring out how to deal with it. Fed officials appear uncomfortable with the idea of raising interest rates to prick a bubble, because rates affect a wide swath of economic activity, and a bubble may be confined to just one area. "Monetary policy, for which we in the Federal Reserve are responsible, is a blunt instrument with economy-wide effects," said Federal Reserve Bank of Minneapolis President Gary Stern. "We should not pretend that actions taken to rein in those asset-price increases, which seemingly outstrip economic fundamentals, won't in the short run curtail to some extent economic growth and employment." Fed officials are leaning toward regulating financial firms with more of a focus on how they are contributing to risk throughout the financial system. This approach could also have drawbacks, said Princeton economist Hyun Song Shin. "These Wall Street people are very intelligent, and their incentives are so vast that they're going to find a way to go around the rules you set down," he said. "Leaning against the wind by raising interest rates in the face of what seems like a credit boom is one way of at least damping down on potential excesses." This is the issue. If the Fed causes a slowdown in the economy in order to avoid a bubble, will that be accepted, or will people decry their action as limiting growth without enough cause. On the other hand, through lobbying and other means, they might not be able to deal with the problem companies effectively. Here’s an example going forward:

The Fed And Bubbles
Justin Lahart with an excellent post on the WSJ about the Fed trying to avoid bubbles in the future:

http://online.wsj.com/article/SB122420268681343047.html

“Once authorities identify a bubble, the next step is figuring out how to deal with it. Fed officials appear uncomfortable with the idea of raising interest rates to prick a bubble, because rates affect a wide swath of economic activity, and a bubble may be confined to just one area.

“Monetary policy, for which we in the Federal Reserve are responsible, is a blunt instrument with economy-wide effects,” said Federal Reserve Bank of Minneapolis President Gary Stern. “We should not pretend that actions taken to rein in those asset-price increases, which seemingly outstrip economic fundamentals, won’t in the short run curtail to some extent economic growth and employment.”

Fed officials are leaning toward regulating financial firms with more of a focus on how they are contributing to risk throughout the financial system. This approach could also have drawbacks, said Princeton economist Hyun Song Shin.

“These Wall Street people are very intelligent, and their incentives are so vast that they’re going to find a way to go around the rules you set down,” he said. “Leaning against the wind by raising interest rates in the face of what seems like a credit boom is one way of at least damping down on potential excesses.”

This is the issue. If the Fed causes a slowdown in the economy in order to avoid a bubble, will that be accepted, or will people decry their action as limiting growth without enough cause. On the other hand, through lobbying and other means, they might not be able to deal with the problem companies effectively.

]]> By: Ron http://taxesandbudget-blog.ncpa.org/monetary-policy-the-seen-and-the-unseen/comment-page-1/#comment-7095 Ron Thu, 16 Oct 2008 16:29:29 +0000 http://www.bob-mcteer-blog.com/?p=129#comment-7095 <p>A Major Cause of the Global Financial Meltdown Was the Federal Reserve</p> <p>Many investors and concerned citizens around the world are showing their outrage at what the Federal Reserve has done to the American economy with their easy money policies which caused the credit & real estate bubble and subsequent global financial meltdown.</p> <p>Join the thousands who are signing & commenting on the Abolish the Federal Reserve Petition at</p> <p>(http://www.petitiononline.com/fed/petition.html)</p> A Major Cause of the Global Financial Meltdown Was the Federal Reserve

Many investors and concerned citizens around the world are showing their outrage at what the Federal Reserve has done to the American economy with their easy money policies which caused the credit & real estate bubble and subsequent global financial meltdown.

Join the thousands who are signing & commenting on the Abolish the Federal Reserve Petition at

(http://www.petitiononline.com/fed/petition.html)

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