I have been struck by parallels between the challenges facing the
Federal Reserve today and those when I first entered the Federal Reserve
System as a neophyte economist in 1949.
Most striking then, as now, was the commitment of the Federal Reserve, which was and is a formally independent body, to maintaining a pattern of very low interest rates, ranging from near zero to 2.5 percent or less for Treasury bonds. If you feel a bit impatient about the prevailing rates, quite understandably so, recall that the earlier episode lasted fifteen years.
The initial steps taken in the midst of the depression of the 1930s to support the economy by keeping interest rates low were made at the Fed’s initiative. The pattern was held through World War II in explicit agreement with the Treasury. Then it persisted right in the face of double-digit inflation after the war, increasingly under Treasury and presidential pressure to keep rates low.
The growing restiveness of the Federal Reserve was reflected in testimony by Marriner Eccles in 1948:
Most striking then, as now, was the commitment of the Federal Reserve, which was and is a formally independent body, to maintaining a pattern of very low interest rates, ranging from near zero to 2.5 percent or less for Treasury bonds. If you feel a bit impatient about the prevailing rates, quite understandably so, recall that the earlier episode lasted fifteen years.
The initial steps taken in the midst of the depression of the 1930s to support the economy by keeping interest rates low were made at the Fed’s initiative. The pattern was held through World War II in explicit agreement with the Treasury. Then it persisted right in the face of double-digit inflation after the war, increasingly under Treasury and presidential pressure to keep rates low.
The growing restiveness of the Federal Reserve was reflected in testimony by Marriner Eccles in 1948:
Under the circumstances that now exist the Federal Reserve System is the greatest potential agent of inflation that man could possibly contrive.http://www.nybooks.com/articles/archives/2013/aug/15/the-fed-big-banking-crossroads/?pagination=false
No comments:
Post a Comment