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> People are scared as hell of inflation and that's why the Fed was created. The rationale for the Federal Reserve Act was not inflation but financial crises,
by abecedarius 6y ago
> People are scared as hell of inflation and that's why the Fed was created.
The rationale for the Federal Reserve Act was not inflation but financial crises, more or less like the 2008 one. Inflation in the U.S. before the Fed was rare and episodic, e.g. "not worth a continental". (BTW I think it's far from clear the Act made us better off wrt financial crises either, considering the 1930s for a start.)
- ObserverNeutral 6y agothen why the Fed was assigned the job of keeping prices stable? All the other parameters in the economy such as the stock market, real estate, interest rate are free to fluctuate but the Fed can use its powers to keep prices stable and people employed. It's clearly a political entity
- abecedarius 6y agoCalling inflating prices "stable" is doubletalk, whether or not the policy is a good idea. The inflation-targeting policy framework dates from 1980ish, influenced by Friedman's monetarism and "rational expectations", as I understand it (poorly). In the decades before that, after the Depression and WW2, the official policy was more Keynesian in flavor. But that was not the rationale to create the Fed, again. More recently since 2008 and especially 2020, it's looking like a new regime again, and I wouldn't count on the next decade looking like the past several.