Statements like this from Allan Sloan indicate that we are failing miserably on so many levels.
Even before the Republican attack, our central bank was rapidly losing influence in the world, relative to other players. Part of that is because our country’s influence is shrinking—but another, big part of the problem is QE2, which is econ-speak for "printing money."
Sloan has reported on the Fed’s raising and lowering of interest rates for years. All of which is econ-speak for “printing money.”
That is, of course why we call it Monetary Policy.
When I teach monetary policy, I go through this whole thing about fiat currency, legal tender, reserve requirements, etc. I assume Sloan was forced to sit through this lecture as well. I assume that he found it interesting since he went on to become a reporter on this issue.
Yet, the core concept that we conduct all forms of monetary policy by adjusting the rate at which the central bank prints money seems not to have sunk in.
2 comments
Comments feed for this article
Tuesday ~ November 16th, 2010 at 5:54 pm
jazzbumpa
Or, as Delong so often says, “Why, oh why, can’t we have a better press corps?”
Cheers!
JzB
Tuesday ~ November 16th, 2010 at 6:04 pm
Andy Harless
Yes but not quite. Printing money is a side effect of lowering interest rates. (Actually it’s the mechanism by which the intended effect is accomplished, but in my analogy, the same may be said for the effects of certain medicines that are valued for their indirect effects rather than their sometimes unpleasant direct effects.) Technically, when short rates are above zero, the Fed could choose to ease quantitatively by buying pre-specified quantities of short-term T-bills rather than easing interest rates by buying whatever quantity turns out to be necessary. This is rather a technical point but not quite inconsequential. I’m actually puzzled as to why the Fed chooses to ease rates when and only when it is operating at the short end of the yield curve. The logical extension of the Fed’s conventional strategy is not to do QE across the entire curve but to target interest rates at specific points on the curve (perhaps by gradually extending ZIRP to higher and higher maturities). Quantitative or not, easing will necessarily involve printing money, but why must the Fed choose a policy that is defined by the printing of money?