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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsRyan: Strip Fed of mandate to maximize Employment
Some background here. Inflation and unemployment are inversely related. There is a level called "full employment" that is that the level below which unemployment causes inflation.
The federal reserve has two official missions. 1) To keep inflation low. 2) To keep unemployment low. Since the two are at odds with each other the Fed's mission is to constantly pursue the best balance of the two, seeking to keep as at "full employment," which is not the same as 100% employment. Full employment is the optimum level to balance employment and inflation.
If the Fed's only mission was price stability they could do it easily be making the economy contract every time there was any inflation at all and stimulating only in the case of nominal deflation. We would have something like 0% inflation and 15-20% unemployment, and a much smaller economy.
0% inflation would collapse the banking system, but it would please a certain school of economic crackpots who think that since a wheelbarrow is always a wheelbarrow there is no reason for the price of a wheelbarrow to ever change. (During the dark ages that was the case. There were periods of amazing price stability.)
Taking away the Fed's mission to pursue full employment makes about as much sense as taking away their mission to pursue stable prices.
Republican vice presidential nominee Paul Ryan said on Friday that another round of monetary stimulus from the U.S. Federal Reserve would be a bad idea.
Ryan's comments in an interview with CNBC came ahead of the Fed's Sept. 12-13 meeting, where some economists think the policymakers will unveil another round of bond buying to prop up the country's weak economic recovery.
"All this easing is simply, in my opinion, the Federal Reserve trying to bailout bad fiscal policy," Ryan said. "I think the costs are clearly outweighing the benefits of this."
...Ryan has been a harsh critic of the Fed's loose monetary policy. He has backed legislation that would open up the Fed's monetary-policy decisions to congressional scrutiny and strip the central bank of its mission to seek maximum employment.
http://www.newsmax.com/Newsfront/stimulus-ryan-jobs-numbers/2012/09/07/id/451096
Note: The term "maximum employment" is incorrect. The Fed has no mandate to "seek maximum employment," but rather to seek the maximum level of employment that is not damagingly inflationary.
leveymg
(36,418 posts)Notice that he has no problem with the mandate to stimulate the bloody bottom-line the frickin' too-big-to-regulate global banks?
One-dimensional. Monomaniac. Enemy of the People.
unblock
(52,191 posts)hey, nothing like a depression to keep inflation in check!
oh, shit! bankruptcies are DOWN! better tighten the money supply again!
oh, shit! gdp is actually UP! better jack up interest rates to 1000% so no one can borrow!
cthulu2016
(10,960 posts)In 1981 inflation was so out of hand that the Fed attacked it 100% without regard for the effect on employment. Thus the very sharp recession with unemployment over 10%.
That was arguably a needed emergency measure, but was a good historical example of how the Fed can always defeat inflation if economic growth is set aside as a concern.
unblock
(52,191 posts)a completely one-sided mandate would turn even recession into catastrophe.
ArizonaLib
(1,242 posts)How ticked off Bush '41 was when Alan Greenspan refused to lower interest rates leading up to the '92 election, because Bush's debt was so high?
TTUBatfan2008
(3,623 posts)You mean like the tax cuts and wars that YOU voted for during the Bush Administration? $5 trillion in debt piled on the shoulders of taxpayers by Paul Ryan and all the other Republican Party hacks in Congress. You are a huge part of the so-called bad fiscal policy that you're criticizing. Don't attempt to run from it and act like you had nothing to do with it, Paul.