What tools does the Fed have left?

Discussion in 'Politics Discussion' started by baudwalk, Apr 11, 2016.

  1. baudwalk

    baudwalk Senior Investor

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    http://www.brookings.edu/blogs/ben-bernanke/posts/2016/03/18-negative-interest-rates
    Ben Bernanke, a Distinguished Fellow in Economics at the Brookings Institute, has written a 3-part treatise on what the Federal Reserve might be able to do should the economy stall or falter. The toolbox may include negative income rates, targeting longer-term interest rates, and a Money-Financed Fiscal Program. It is an interesting read that may well attract the attention of government officials. I cannot comment on his conclusions yet; I'm still working my way through the writings. Clearly though, it is recommended reading.
     
    Last edited by a moderator: Jul 8, 2016
  2. petesede

    petesede Guest

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    There was a really fascinating interview on CNN a couple weeks ago, and had all of the living Fed chairs on stage at the same time ( Greenspan was on video). The one part I found interesting, and is related to this is that the fed purposefully has a very small toolbox. It isn´t meant to be this all powerful body. It also has a very small and precise job. Grow the economy, increase jobs while keeping inflation at 2%. But the comment that struck me was something to the effect that at some point the only thing they can do is publicly recommend legislative actions.
     
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  3. gmckee1985

    gmckee1985 Senior Investor

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    I'd say we are due for a recession in the next couple of years. Which is a scary thought, considering how weak this recovery from the Great Recession has been. Most areas still haven't recovered the jobs lost during it. Especially rural areas. And most folks haven't seen a raise in quite some time. I think the Fed has done a good job sticking to it's intended purpose during the past couple of decades. Interest rates will of course have to be raised more at some point.
     

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