The world is in economic crisis. Quite understandably, much attention has been given to cutting runaway government spending, a fundamental cause of the crisis. Much less attention has been given to the fundamental defects of the monetary system. These defects are at the heart of the economic collapse. Both budgetary and monetary issues must be examined and resolved. The United States and the world should not be condemned to struggle with depreciating and appreciating currencies, with inflationary and deflationary monetary policies that are out of control. The Heritage Foundation’s upcoming Conference …
The Federal Reserve’s Open Market Committee meets today in the face of tremendous economic uncertainty. In light of last week’s dismal jobs report and related evidence of a faltering recovery, markets are looking for signs as to what the Fed might say and do. It’s widely expected that the Fed will downgrade its near-term outlook for the economy and will suggest some actions it might take if a severe downturn materialized. While the attention given to the jobs picture is understandable, some disturbing issues surrounding monetary conditions deserve equal attention. …
The White House has indicated it intends to nominate San Francisco Federal Reserve Bank President Janet Yellen as Vice-Chairman of the Federal Reserve Board in Washington. The White House has said the top candidates for the two remaining Board slots are the relatively unknown attorney Sarah Raskin, Maryland’s Commissioner on Financial Regulation, and Peter Diamond, a well-known Social Security specialist from MIT. Yellen’s appointment is logical. A highly regarded macroeconomist who previously served as a member on the central bank’s board she is expected to perform the traditional roles of …
Inflation is ultimately and always a monetary phenomenon. The Federal Reserve’s extraordinary actions during the recent crisis now require executing a difficult exit strategy without short-circuiting the recovery and most especially without letting inflation get out of control. Comments by Fed officials beginning with Chairman Ben Bernanke suggest they are committed to containing inflation and the Fed appears to have the tools to do so. But will they use those tools wisely? A specific, consistent thread in Bernanke’s comments suggest the Fed will yet let inflation get out of the …
Hardly any Washington policymaker is worrying about inflation right now. Who blames them? The economy continues to contract; prices are falling, not rising; and, President Barack Obama speaks about years, not months, before things are better. Inflation seems about as remote right now as, well, a good return on your stock investments. This inattention to future inflation is unfortunate: there are mounting signs that the big bugaboo of the 1970s might be ready for a return visit. No, I’m not seeing rising prices; but I am seeing the foundations of …
Despite the Fed’s bold and timely moves, the U.S. economy overall has at best entered a period of slow growth, and may be teetering on the edge of recession if one is not already at hand. Two major sectors of the economy – housing and financial markets – are in severe recession, and it is unclear that the other elements of the economy, especially business investment and the health care and net trade sectors will be sufficient to stave off an actual overall contraction. While the underlying fundamentals of the …
