Independent Institute links to Burton A. Abrams’s (Research Fellow at the Independent Institute and Professor of Economics at the University of Delaware) sound criticism of Fed policy at Investors.com powered by Investor’s Business Daily. Abrams provides some of the best commentary I have seen on the Fed’s nonsensical commitment to 2% inflation as price stability.
Some highlights:
“Alcohol is important to Federal Reserve folklore. The economist Milton Friedman likened the central bank to a drunk driver careening down the highway: The drunk driver goes too fast, applies the brakes too late, oversteers and eventually lands the car in the ditch.”
“The drunken behavior of the Fed is due in large part to its “dual mandate” to maintain price stability and full employment — potentially conflicting goals that can produce schizophrenic behavior.”
“Today the Fed demonstrates it is more than a bit tipsy. Its Quantitative Easing program, undertaken in the name of “stimulus” to return the economy to full employment, has produced over $2.5 trillion in excess reserves in the banking system, much more than all the checkable deposits in the economy. This promises to cause the Fed its biggest hangover in decades.”
“As further evidence of tipsy behavior, the Fed has taken it upon itself to proclaim a 2% inflation rate as a sensible goal. Apparently it doesn’t care that it’s legislatively mandated to achieve price stability. But the Fed ignores that mandate at our peril.”
“Still, Yellen is adamant about getting more inflation now and keeping the punch bowl out. But as any sober driver knows, you take your foot off the gas pedal long before you turn off the highway.”
“The longer it waits to take away the punch bowl, the greater the odds that its policy of “free drinks” is creating dangerous bubbles in financial and real estate markets, and intensifying inflationary pressures.”
More reason the Fed must be constrained and then allowed wither away and the sooner the better.
