Why the Fed's monetary policy has been a failure

Passing its 100th birthday, the Federal Reserve is receiving unprecedented scrutiny. Even with the help of strenuous actions on the fiscal side, economic and credit-market recovery from the recession of 2008-2009 was notoriously slow. The ultimate test of its role as overseer and regulator of the co...

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Bibliographic Details
Published in:The Cato journal 2014-03, Vol.34 (2), p.407
Main Author: Ranson, R. David
Format: Article
Language:English
Subjects:
Banks
Borrowing
Central banks
Economic conditions
Economic crisis
Failure
Federal Reserve monetary policy
Interest rates
Microeconomics
Monetary policy
Prices
Recessions
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Summary:Passing its 100th birthday, the Federal Reserve is receiving unprecedented scrutiny. Even with the help of strenuous actions on the fiscal side, economic and credit-market recovery from the recession of 2008-2009 was notoriously slow. The ultimate test of its role as overseer and regulator of the commercial banking system met with a very poor result. Monetary policy might even have contributed to economic stagnation comes from several concerns: 1. Fed thinking about the credit market is at odds not only with Adam Smith's Invisible Hand but with standard microeconomics. 2. Expectations that current monetary policy tools will have the desired effects on credit volume and economic growth lack straightforward empirical verification in the long sweep of US history. 3. As a creation of the banking industry, the Fed long ago became its designated protector. 4. The Fed overrelies on "headline" statistics of public debate that have been politicized and tend to obscure more than they reveal. The author addresses these considerations in turn.
ISSN:0273-3072
1943-3468