Bubbles in the Punchbowl: Bivens on the Fed

May 28th, 2014 at 7:11 pm

Read this wisdom from Josh Bivens on the Federal Reserve and the criterion for filling empty slots on the board of the big bank.

One, of many, resonant points: There’s this tension between accommodative monetary policy and asset inflation risk.  Yet, at times like the present, the Fed must be able to upweight the full employment part of their mandate.  The central bank cannot take the position: “we’d really like to help boost growth and jobs but our hands are tied by asset-bubble-risk.”  The way out of that cul-de-sac, as Josh stresses, is adequate financial market oversight, including ID’ing bubbles.  Re the latter, both G-span and Bernanke argued the Fed could neither spot nor stop bubbles.  Comments by Chair Yellen suggests she realizes that the contemporary Fed doesn’t have that luxury.

Josh writes: “It is bankers, not workers, who really need the punchbowl taken away.”

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3 comments in reply to "Bubbles in the Punchbowl: Bivens on the Fed"

  1. Robert Buttons says:

    Mr. Bivens says: “Help wanted: evidence-based central bankers”

    An evidence based Central banker would realize that central planning doesn’t work, when, after 5 years of highly accomodative fed action we are still suffering from economic stagnation (viz. last quarters pathetic 0.1% GDP).

    But “evidence based” always means “let’s go by the evidence that best fits my preconceptions”

  2. Sandwichman says:

    Josh writes: “It is bankers, not workers, who really need the punchbowl taken away.”

    They need a lot more than the punchbowl taken away.