On Tue, May 4, 2010 at 4:53 AM, lars wrote:

friends, romans, countrymen!

attached you’ll find an interview with the economist randall wray on the following topic:

Truths and myths of the Federal Reserve
Is the Federal Reserve an almighty-like “creature” or rather extremely limited in its essential operations? L. Randall Wray, an expert on monetary policy, answers questions with regard to the Fed and central banks in general.

Truths and myths of the Federal Reserve

4 Responses

  1. Wow! Awesome interview of Dr. Wray.

    He makes the following statement:
    Yes, we are in the middle of the biggest speculative bubble in human history—equities and commodities, and, believe it or not, real estate is still bubblicious. It will crash. And, yes the Fed deserves some blame. But it is not due to Fed money creation.

  2. depends on policy response. if i were in charge we’d quickly be back to full employment, for example

  3. What Randy wrote here is good stuff (and the first par. is something Austrians and others who distrust central planners would agree with):

    Now as I said earlier, I do think Greenspan and Bernanke have almost always got things wrong—they always misread the economy. They try to fight inflation exactly when the economy heads into a recession. They usually fail to see speculative booms. They promote deregulation and promote risky new financial practices and products. They raise interest rates at the wrong time; indeed, they cause a lot of asset price instability by continually monkeying around with interest rate targets. That is not good, but impacts on financial asset prices are usually short-lived. And as we now know, the NY Fed, especially, aids and abets dangerous practices and even fraud. So while I think most people overestimate the power in the hands of our modern day Wizard of Oz, I do agree that we ought to tie the hands of the Wizard.

    So here is what I propose: Congress should mandate that the Fed set the overnight rate at 25 basis points (0.25%) and leave it there. Forever. That would be the extent of monetary policy in the US. A very simple robot would replace the FOMC, programmed to pay 25 basis points on reserves, and charge 50 basis points on loans of reserves to chartered banks.

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