The Federal Reserve has been a core component of U.S. monetary policy since it was founded by an act of Congress in 1913. The Fed was devised to stabilize the banking sector and create monetary policy, while improving the flow of money and credit throughout the U.S. economy.
The question for some is- Has the Federal Reserve outlived its usefulness?
Many watchers point out that the Fed often misses economic signals and reacts slowly to economic changes. They may subsequently raise rates too late… lower rates too early… and cause inflationary periods when attempting to tame rising prices. Is it worth having a central bank?
Read some thoughts from 2015 about the Three Strikes of the Fed. Pay particular attention to the section: ‘Fed Strike 4 looms’; to the point…
‘Future crises caused by Fed policy are likely to be larger — larger even than the Great Depression — precisely because the Fed has taken such extreme measures. For example, the Fed has created more money in the last decade than in the prior nine decades of its existence.’
That quotation was written in 2015 when the national debt was more like $18 trillion compared to the $34 trillion owed today!
Read here some thoughts from Professor Rajan, Distinguished Service Professor of Finance at Chicago Booth, my alma mater. Professor Rajan was the central banker for the Country of India a few years back and worked for the current Prime Minister Narendra Modi. He has some good points, like ‘Central banks are not innocent bystanders, and the fact that their role in precipitating the Global Financial Crisis was not adequately highlighted has given them a freedom of action that has resulted in new fragilities.’– perhaps so. Have a look- I’ve included the Chicago Booth Report article below. Let me know what you think by reaching out to me here!
~ Brian Kasal- The Leadership Matrix
Click Here- The Case for and Against Central Bankers
P.S.- Did you see my last Leadership Matrix post? Applying the Concept of Building a Better Mousetrap to Trading
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