Friday, March 14, 2014

Question And Answer On American Economic Policy

Reading Stiglitz's The Price of Inequality, I came to the following realization:
Q: What does Superman have, that the Federal Reserve
     is in sore need of?
A: Supervision.
Here's how Stiglitz puts it:
... It is evident now [2012] that the Fed failed to maintain economic stability — and after the crisis, it failed to restore the economy to health; it is evident, too, that the economic doctrines on which its policies were based were badly flawed. No policy is without risk. But the policies chosen by the Fed forced the brunt of the risk to be borne by homeowners, workers, and taxpayers, while the upside was captured by the banks. There were other policies, with other risks, in which the rest of our society would have fared far better, and the banks worse. We need to recognize that a central bank's decisions are essentially political: they should not be delegated to technocrats, and they certainly can't be left to those who disproportionately represent one of the vested interests.
From The Price of Inequality, p.254.

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