3 ms·

Economics is not my area of expertise. So, I apologize if my questions is daft, but what other choices did the Fed have? Surely they considered multiple scenari

Economics is not my area of expertise. So, I apologize if my questions is daft, but what other choices did the Fed have? Surely they considered multiple scenarios and chose the one with the least harm:benefit ratio, right?

Rury 4y ago
They don't. The options the Fed has are: - Continue printing/lending (enabling further inflation) - Cut printing/lending (economy/markets crash) - Try to perfectly balance the level of printing/lending (resulting in a period of economic stagnation and slow growth as we pay off our debts / deleverage. AKA the soft landing) Option 3 is what they're trying to do, but it's unrealistic to achieve as it requires perfection not only on their part, but on market participants as a whole, so some degree and combination of all 3 is likely to happen.
aksss 4y ago
I think a consistent criticism has been of their idleness in response to the inflationary threat and not taking it seriously enough, soon enough. It didn’t take fortune tellers to see where things were headed in spring of ‘21 but we kept injecting cash and keeping the cost of cash near zero. Lots of excuses for why that is, but behind the eight ball is where they landed. Their considerations are as you describe but their concept of benefit includes the political, their finance industry customers, and many other conflicting interests. So harm:benefit, yes, but some people’s perceived benefits can certainly cause harm to the greater economy.
- pipodeclown 4y ago
  We have a saying in my country: the best sailors are on the shore giving advice to captain on the boat.' Sure, they might have taken inflation more serious earlier and dramatically raised rates. Guess who would have been blamed for the subsequent recession and being branded as too afraid of a little bit.of inflation?

3 ms·

Economics is not my area of expertise. So, I apologize if my questions is daft, but what other choices did the Fed have? Surely they considered multiple scenari

by hirvi74 4y ago

Rury 4y ago
They don't. The options the Fed has are: - Continue printing/lending (enabling further inflation) - Cut printing/lending (economy/markets crash) - Try to perfectly balance the level of printing/lending (resulting in a period of economic stagnation and slow growth as we pay off our debts / deleverage. AKA the soft landing) Option 3 is what they're trying to do, but it's unrealistic to achieve as it requires perfection not only on their part, but on market participants as a whole, so some degree and combination of all 3 is likely to happen.
aksss 4y ago
I think a consistent criticism has been of their idleness in response to the inflationary threat and not taking it seriously enough, soon enough. It didn’t take fortune tellers to see where things were headed in spring of ‘21 but we kept injecting cash and keeping the cost of cash near zero. Lots of excuses for why that is, but behind the eight ball is where they landed. Their considerations are as you describe but their concept of benefit includes the political, their finance industry customers, and many other conflicting interests. So harm:benefit, yes, but some people’s perceived benefits can certainly cause harm to the greater economy.
- pipodeclown 4y ago
  We have a saying in my country: the best sailors are on the shore giving advice to captain on the boat.' Sure, they might have taken inflation more serious earlier and dramatically raised rates. Guess who would have been blamed for the subsequent recession and being branded as too afraid of a little bit.of inflation?