Tags: Grant | Fed | dual | mandate

Robert Feinberg: James Grant Still Unhappy With Fed Policy

Wednesday, 03 Oct 2012 10:43 AM

By Robert Feinberg

In an appearance on CNBC Wednesday morning, James Grant, publisher of Grant’s Interest Rate Observer, repeated familiar arguments against the ongoing accommodative policy pursued by the Federal Open Market Committee, which Grant labeled, as do I, QE-n. In the setup to the interview, the remarks of Charles Evans, president of the Federal Reserve Bank of Chicago, stating that the Fed should continue to buy securities until it saw the needed response in the unemployment rate and that the Fed would simultaneously watch for any evidence of an untoward rise in inflation were replayed. Evans presented this as a straightforward adherence to the dual mandate of fostering economic growth without inflation.

Grant’s complaint is that these actions fail to meet what he calls the “common sense mandate.” He argues that the Fed was created to supply liquidity when it was needed seasonally or cyclically, but the Fed is not empowered to manage the economy according to its own economic model. He asserted, without elaborating, that the experience of the 1930s that Fed Chairman Ben Bernanke has studied so extensively is irrelevant to the current circumstance. Grant called for a restoration of capitalism rather than having the economy managed by government authorities.

Another panelist, James Tisch, CEO of Loews, observed that the Fed is under enormous political pressure to do something, and its actions have inflated prices in certain areas, such as housing and equities.

What these gentlemen have missed, and what has been missing from the debate on Fed policy is the fact that the so-called dual mandate has expanded over a span of decades to encompass perhaps as many as eight or more mandates, in a classic case of mission creep.

If one adds the mandates to promote the re-election of the president and reappointment of the Fed chairman, the total of mandates is up to four. If one adds support for the banking, housing and securities industries, the total grows to seven, and it is easy to see that this number is likely to grow after the election, perhaps to encompass the commercial real estate industry, which would bring the total to eight.

Moreover, Fed policy seems to have been influenced over the last 50 years or so by the philosophy of Hyman Minsky, an economics professor who served as a consultant to the Commission on Money and Credit in 1957. The core of Minsky’s philosophy was that the government can and should intervene to improve the performance of markets.

Perhaps the scope of the debate needs to expand to match the reach of the Fed’s growing mandate.

© 2015 Moneynews. All rights reserved.

Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

As Storm Rushes In, Airlines Cancel While Salt Sellers Gain

Monday, 26 Jan 2015 22:32 PM

Businesses large and small are feeling the effects of a huge snowstorm sweeping into the Northeast Monday. For some, win . . .

Stocks Rise as Euro Rallies Amid Greek Fallout; Gold Slips

Monday, 26 Jan 2015 17:20 PM

U.S. stocks rose, while the euro strengthened with European equities amid optimism fallout from anti-austerity party Syr . . .

Middle Class Shrinks as Households Earn Less

Monday, 26 Jan 2015 15:15 PM

The once-thriving middle class has been disappearing since the late 1960s, but since 2000, it's because its incomes are  . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved