Infested with CrawdadsNot Applauding
Steadily More Dovish
#3 Mandate
Puerto Rico, Cleveland, New York, Cleveland, Austin, and Dallas
In an ideal world, we wouldn’t have to read the Federal Reserve’s rabbit entrails to discern the economy. But Since the Fed exists in the real world, and its decisions matter, we have to pay attention.
Just so new and perhaps even old readers know my views on the Fed: I believe we need it to handle the practical matters of the banking system plus interact with other international central banks (we live in a complicated world) and, in the midst of crisis, act as a lender of last resort and liquidity provider. I agree with Walter Bagehot’s(pronounced badget) very important pronouncement (often called "Bagehot's Dictum") that “in times of financial crisis central banks should lend freely to solvent depository institutions, yet only against sound collateral and at interest rates high enough to dissuade those borrowers that are not genuinely in need.” That rule or dictum remains wise.
I would prefer that the market set rates at the lower end as opposed to the Federal Reserve, again, except in times of crisis. I don’t believe 12 people sitting around a desk, no matter how brilliant and educated they are, can arrive at a proper market-clearing rate better than the market itself. Seriously, LIBOR was set for decades without government intervention. Yes, in times of crisis it got a little funky, but that is when you want the central bank to step in (and then get out as soon as possible).