http://www.nytimes.com/2013/01/20/business/fed-monetary-policy-drives-best-at-higher-speeds.html?ref=business
This article discusses the recent monetary policies Bernanke has implemented in order to help the economy continue to recover. They are currently using expansionary monetary policy in the form of open market operations through buying bonds. This approach includes the risk of creating inflation; but in her article Romer states that Bernanke and the Fed may argue that a strong dollar isn't necessarily desirable in a weak economy. This article also suggests that the current open market operations could be accelerated in order to bring back a strong economy faster. A pressing concern that is mentioned is the Fed's commitment to their new policies. According to Romer, it is important that they do not appear shaky on the policies that they implement and that a fast and aggressive approach is needed in order to bring back a strong economy as quickly as possible.
I like the article because it makes sense. Inflation is now at a relatively low level. Expansion's upsides outweigh the downsides. The problem is that the Fed is only responsible for the monetary policy. It is upto the Federal Government to issue fiscal policies as complements of the monetary policy.
ReplyDeleteThe article certainly makes its point well and does a good job in discussing the rationale of the Federal Reserve.
ReplyDeleteFor the most part, the United States inflation rate has been relatively low recently, even as the Fed has been aggressively increasing the monetary base of the country, through open market operations and quantitative easing. The monetary base of America has been more than tripled since 2009 and inflation.
While the United States is now technically out of the recession, it is important to give the economy a strong boost right now to resume the flow of money and lower unemployment to a more ideal level.