Federal Reserve: High Pay, Low Performance

Chris EdwardsEconomists are blaming today ’s high inflation on excess federal spending, supply disruptions, and misjudgments by the Federal Reserve. With inflation running at 8 percent, the Fed clearly failed its mission to hold inflation to 2 percent.John Cochranenoted that the Fed “was completely surprised by the surge of inflation, and through most of [2021] insisted it would be ‘transitory,’ and go away on its own. That turned out to be a major institutional failure.” Jim Dornargued, “The Fed’s forecasts, based on complex economic models of the economy, have been error‐​prone for years.”Another problem appears to be that the Fed misreads how the economy works. The editors of theWall Street Journalargued that part of the blame for inflation “lies with the Fed’s economic models, which are rooted in Keynesian analysis in which demand trumps all. The Fed models give little thought to incentives for or barriers to the supply‐​side.”TheJournalcontinued that, “The Fed is supposed to have the world’s smartest economists and access to the best financial information. How could they make the greatest monetary policy mistake since the 1970s?”Government mistakes are usually blamed on underfunding, but the Fed can ’t make that claim. The “world’s smartest economists” come with a price tag, as revealed by data in Fedbudgets andstatistical tables.The Federal Reserve System includes the Board of Governors and 12 regional banks. In 2021, the ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs