Jensen: Federal Reserve needs to make changes
By: Matteo Jensen
Issue date: 4/10/08 Section: Opinion
In his masterful novella, Cronica de una Muerte Anunciada, Gabriel García Márquez recreates a compelling tale of small-town murder and intrigue.
The reader quickly learns that twin brothers Pablo and Pedro Vicano have boldly announced their intention to kill Santiago Nasar. Word swiftly spreads throughout the village until all but the victim are aware of the impending danger. However, no one acts to save Santiago, and he is brutally murdered. Pedro and Pablo are clearly guilty of this violent and gruesome act, but the townspeople, who failed to prevent it, also share in the guilt.
In the same manner, the Federal Reserve -- its chairman, board of governors, regional bank presidents and all -- is complicit in the most recent recession faced by the United States.
The Fed watched as the housing bubble was inflated by its lenient monetary policy. Despite advanced warnings of an overheating market and unsustainable expansion, the Fed failed to hike interest rates and refused to veer from its strict adherence to the supply-side cult and its dubious doctrine of deregulation and limited oversight.
The results have been ruinous. For many Americans, the sky seems to be falling. The foreclosure rate is skyrocketing. Oil is reaching record levels each week. The economy has hemorrhaged hundreds of thousands of jobs. The once almighty dollar is in a kamikaze tailspin that international investors are increasingly doubtful it can pull out of, yet debt continues to mount at record levels. The situation is dire.
Reform of this system is vital to the long-term rejuvenation of the U.S. economy. First and foremost, the Federal Reserve must be given a single target. Currently, the Fed is burdened by two ponderous mandates which often makes the Fed act as if it has dual personalities -- and forces it to choose to benefit Wall Street or Main Street. Today's central banks, unlike the Fed, were created out of compromise, not crisis. It is essential that the Federal Reserve evolves to better serve its constituents (banks) and consumers by targeting inflation.
The reader quickly learns that twin brothers Pablo and Pedro Vicano have boldly announced their intention to kill Santiago Nasar. Word swiftly spreads throughout the village until all but the victim are aware of the impending danger. However, no one acts to save Santiago, and he is brutally murdered. Pedro and Pablo are clearly guilty of this violent and gruesome act, but the townspeople, who failed to prevent it, also share in the guilt.
In the same manner, the Federal Reserve -- its chairman, board of governors, regional bank presidents and all -- is complicit in the most recent recession faced by the United States.
The Fed watched as the housing bubble was inflated by its lenient monetary policy. Despite advanced warnings of an overheating market and unsustainable expansion, the Fed failed to hike interest rates and refused to veer from its strict adherence to the supply-side cult and its dubious doctrine of deregulation and limited oversight.
The results have been ruinous. For many Americans, the sky seems to be falling. The foreclosure rate is skyrocketing. Oil is reaching record levels each week. The economy has hemorrhaged hundreds of thousands of jobs. The once almighty dollar is in a kamikaze tailspin that international investors are increasingly doubtful it can pull out of, yet debt continues to mount at record levels. The situation is dire.
Reform of this system is vital to the long-term rejuvenation of the U.S. economy. First and foremost, the Federal Reserve must be given a single target. Currently, the Fed is burdened by two ponderous mandates which often makes the Fed act as if it has dual personalities -- and forces it to choose to benefit Wall Street or Main Street. Today's central banks, unlike the Fed, were created out of compromise, not crisis. It is essential that the Federal Reserve evolves to better serve its constituents (banks) and consumers by targeting inflation.
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