3 ms·

> What is missing from the debates over monetary policy today is the understanding that the Fed was not established to control inflation. Luckily we don't have

by duped 4y ago

> What is missing from the debates over monetary policy today is the understanding that the Fed was not established to control inflation. Luckily we don't have to speculate, since this is spelled out in the US Code. 12 USC 225a reads: > The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. Emphasis mine. Stable prices means mitigating inflation. The author is confusing the mechanisms of the Fed with their mandate. (1) https://www.federalreserve.gov/aboutthefed/section2a.htm https://www.federalreserve.gov/aboutthefed/section2a.htm

wjnc 4y ago
That seems to be added in the 1977 amendment to the bill. Was the same goal in the 1913 bill? Edit: I stumbled upon [1] will trying to find an answer but my lack of US-legalese skill makes it too hard to comprehend. [1] https://uscode.house.gov/view.xhtml?path=/prelim@title12/chapter3&edition=prelim https://uscode.house.gov/view.xhtml?path=/prelim@title12/cha... [2] original text: https://www.llsdc.org/assets/FRAdocs/fra-lh-pl63-43.pdf https://www.llsdc.org/assets/FRAdocs/fra-lh-pl63-43.pdf No “stab” as in stable of stability in there, nor prices in the quoted context. Now that we’ve got that overboard, the article makes pretty good sense to me. Central banks having the function of keeping banks functioning at all times might not always be compatible with central banks have a primary duty to use monetary policy for governments sake. See the conundrum the ECB was and is in. Raise rates (at all or too fast) and states fail. That’s more important to them than banks failing. I have no opinion on what’s right - as an economist I always found monetary economics too hand-wavey (or hard, for a not very mathematical branche of economics). The Hills point might be right.
strangattractor 4y ago
I don't really think SVB is an example of anything other than they were a very large boutique bank. The depositors were primarily Startups with large amounts of cash. Most of their depositors were subject to the same economic forces and tended to behave similarly in unison. This is not a bank that Joe Sixpack opened an account in because he liked the convenience of the ATMs. This is a bank that cultivated relationships with VCs and VCs responded by suggesting their Startups store cash there. The question is "Was this a bank run by idiots or a "bank run" by idiots."

by duped 4y ago

wjnc 4y ago

That seems to be added in the 1977 amendment to the bill. Was the same goal in the 1913 bill? Edit: I stumbled upon [1] will trying to find an answer but my lack of US-legalese skill makes it too hard to comprehend. [1] https://uscode.house.gov/view.xhtml?path=/prelim@title12/chapter3&edition=prelim https://uscode.house.gov/view.xhtml?path=/prelim@title12/cha... [2] original text: https://www.llsdc.org/assets/FRAdocs/fra-lh-pl63-43.pdf https://www.llsdc.org/assets/FRAdocs/fra-lh-pl63-43.pdf No “stab” as in stable of stability in there, nor prices in the quoted context. Now that we’ve got that overboard, the article makes pretty good sense to me. Central banks having the function of keeping banks functioning at all times might not always be compatible with central banks have a primary duty to use monetary policy for governments sake. See the conundrum the ECB was and is in. Raise rates (at all or too fast) and states fail. That’s more important to them than banks failing. I have no opinion on what’s right - as an economist I always found monetary economics too hand-wavey (or hard, for a not very mathematical branche of economics). The Hills point might be right.

strangattractor 4y ago

I don't really think SVB is an example of anything other than they were a very large boutique bank. The depositors were primarily Startups with large amounts of cash. Most of their depositors were subject to the same economic forces and tended to behave similarly in unison. This is not a bank that Joe Sixpack opened an account in because he liked the convenience of the ATMs. This is a bank that cultivated relationships with VCs and VCs responded by suggesting their Startups store cash there. The question is "Was this a bank run by idiots or a "bank run" by idiots."