Wednesday, October 31, 2012

Excellent Description Of What The Fed Does And Why It Is Taking Unprecedented Actions

The President of the Federal Reserve Bank of Minneapolis provides an excellent description of how the Fed operates.  He explains why the Fed has been accomodative during the worse recession in 80 years.  If anything, the risk is that Fed has not been doing enough to strengthen the economy, than too much.  Critics argue that Fed is risking inflation.  His argument is that Fed carefully monitors anticipated inflation and that is why it is less worried about inflation than it is about high and extended unemployment. 

Its important to add that he had been a critic of the Fed's policy not too long ago.  He has changed his mind after examining all of the evidence.  That is not common in today's world where many have an almost religious viewpoint on economic issues that is not dissuaded by disconfirming evidence.

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