Chapter 17 started by articulating the privileges enjoyed by the Federal Reserve under the leadership of Greenspan the Great (1987–2006) and Bernanke the Bald (2006–2014) which from its inception of more than a century eluded its operations. Wright and Quadrini, (2009) called the rare privilege “the halo of success and widespread approbation” (p. 193). We furthermore understood that the central banks, rather than the Federal Reserve were the stronghold of central planning in the free market economy that was why the criticism of the Austrian and the communists’ economists did not prevail after all.
Although the fed owes its genesis to the desires of the Americans to be protected from financial panics and economic crisis, it was the central banks responsibility for stabilizing the macroeconomy. However, we learn that from 1985 to 2007, the U.S. macroeconomy, particularly output, was much less …show more content…
Here we learned that central bank key operations are to stabilize prices, in other words, they are tasked with the ability to control inflation. Secondly, they were to provide economic growth and create employment. This seems to insinuate conflict in their mandate because, even when these two goals are in the long run compactible, in the short-term, it was difficult to accomplish. As we have learned, these two responsibilities force central banks to decide of either to raise interest rates or slow or even stop MS growth to stave off inflation or should it decrease interest rates or speed up MS growth to induce companies and consumers to borrow, thereby stoking employment and growth? These questions pose a dilemma, not just to central banks, but to the economy in general. We additionally noticed that the European central bank has a singular mandate of stabilizing price while the Fed have a dual mandate of price stabilization and create employment. This apparently embedded a weight of responsibility on the Federal
Although the fed owes its genesis to the desires of the Americans to be protected from financial panics and economic crisis, it was the central banks responsibility for stabilizing the macroeconomy. However, we learn that from 1985 to 2007, the U.S. macroeconomy, particularly output, was much less …show more content…
Here we learned that central bank key operations are to stabilize prices, in other words, they are tasked with the ability to control inflation. Secondly, they were to provide economic growth and create employment. This seems to insinuate conflict in their mandate because, even when these two goals are in the long run compactible, in the short-term, it was difficult to accomplish. As we have learned, these two responsibilities force central banks to decide of either to raise interest rates or slow or even stop MS growth to stave off inflation or should it decrease interest rates or speed up MS growth to induce companies and consumers to borrow, thereby stoking employment and growth? These questions pose a dilemma, not just to central banks, but to the economy in general. We additionally noticed that the European central bank has a singular mandate of stabilizing price while the Fed have a dual mandate of price stabilization and create employment. This apparently embedded a weight of responsibility on the Federal