In a very nice post at Econbrowser, Jim describes Fed actions over the last 5 years and ends with this:
"My view is that the Fed never had the power, and lacks the power today, to solve our primary economic problems. However I believe it did have the power, and successfully exercised the power, to prevent our problems from becoming even worse."
That, in my view, is pretty much exactly right.
1 comment:
is this fair - instead of the Fed - substitute the Obama Admin.
Re-writing the James Hamilton piece on the role of the fed
"Some have criticized Obama’s economic policies (the Fed's emergency lending) on the grounds that he (the Fed) took all these extraordinary actions and yet the economy still performed very badly in 2008:Q4 - 2009:Q2. I think this misses the point. I don't believe that it was ever within Obama’s (the Fed's or anyone else's power) to bring the economy quickly back to full employment. Instead, the purpose (of the Fed's emergency lending) was to prevent a very bad situation from becoming even worse than it needed to be. The evidence we now have suggests that he (the Fed) indeed accomplished exactly this.
My view is that the Obama administration (the Fed) never had the power, and lacks the power today, to solve our primary economic problems. However I believe he (it) did have the power, and successfully exercised the power, to prevent our problems from becoming even worse."
In this view Obama's sin was over promising, not policy error.
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