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Showing posts with the label Money supply

An unprecedented move by the FED

In an unprecedented move, the Federal Reserve tied monetary policy to  a specific social metric, an unemployment rate of 6.5%. Given  stubbornly high unemployment levels, this new monetary policy target  is entirely appropriate. Looks like its working. Mr.  Bernanke  appears to be willing to risk his reputation as an  inflation fighter in order to lower the unemployment rate. I think the  Bernanke  Gambit is good news for the unemployed and good news for the  country as a whole. Bernanke  signaled that bondholders would no longer dominate monetary  policy considerations. This is for their own good, since they will  benefit, over the long term, from a fairer and more stable economy. The majority of American citizens are bond sellers, not bondholders.  In a downturn, government spending , required in order to get the  economy out of a recession, is financed through the creation, by fiat,  of new money. The resulting increase in the quantity of money gives  rise to inflation, a