Allan Meltzer did not set out to encourage Americans to consider the unthinkable: the Fed is so dangerous to our economic and political health that it should go. But maybe, just maybe, his new but flawed book may reignite a debate that goes back to Jacksonian America. Gregory Bresiger is the reviewer.
The Fed has announced that it will turn its attention from fighting inflation to fighting deflation. There are serious problems with this approach, writes Frank Shostak. There is nothing wrong with lower prices, and if currency depreciation could improve economic conditions, poverty would have been eradicated a long time ago. In fact, pumping the money supply even more could lead to all round economic devastation.
The World Bank has warned that central bankers around the world are running out of tools for dealing with the flagging global economy. The Fed, in particular, has almost no room left to cut interest rates. The report then turns to hand-wringing about the great monetary fear of our time: deflation.
No one can argue about the current moribund economy, complete with flat or falling stock prices, nonexistent profits, layoffs, airline bankruptcies, and exploding federal and state budget deficits. But few people have accurately pointed out why there is no recovery from the original recession.
A contributing problem of the 1990s economic boom was ideological, and it is one that still persists in the aftermath, writes Christopher Mayer. It was a cultural error that made a hero out of a Fed Chairman and that put so much faith in the Fed to begin with, at the expense of sound economics.
Federal Reserve Chairman Alan Greenspan said last Thursday, during questioning by the Senate's special committee on aging, that he does not believe that a housing price bubble exists on a national level in the United States. "Is Greenspan right?" asks Frank Shostak. To provide an answer to this question one needs to establish—or define—exactly what a bubble is.
Almost exactly ten years ago, a National Commission on Social Security Reform headed by Greenspan proposed a package of benefit cuts and tax increases, which Congress enacted with little change, and which turned out to be one of the most oppressive—and underhanded—things Congress ever did to younger Americans over Social Security. It also failed to solve Social Security's long-term problems.
The United States faces a situation that resembles the late 1970s when the world began to abandon the dollar and liquidate American investments, writes Hans Sennholz. It took two years of Federal Reserve inactivity and 20 percent interest rates to restore foreign confidence and lure foreigner investors and creditors back.
The private sector is good at satisfying consumer demand, but it's not much good at guessing what's in that grab bag that we call a budget deficit, writes Roger Garrison. The uncertainties associated with large federal budget deficits warn against exclusive focus on the total spending done by government. It does matter how that spending is financed.
The latest economic data indicate that the prospects for a sustained economic recovery have been further delayed, writes Frank Shostak in a wide-ranging review of the current economic moment. The low interest rate policy of the Fed remains the major factor behind the continued deterioration.
