Opinion
The Congressional Reserve Board: A Really Bad Idea
—
The Federal Reserve Transparency Act of 2015 should be viewed primarily as an attack on the Fed's independence.
By Kim Schoenholtz and Stephen Cecchetti
What would you think if you were to open your morning newspaper to find the following headline?
"Congress Closes Down Fed, Takes Over Monetary Policy"
If you're like us, you'd panic. In short order, you'd think that long-term inflation expectations would rise, pushing bond yields higher. You'd anticipate an increase in the volatility of growth, employment and inflation. That more volatile environment would drive up the risk premium required on new investments, hindering long-term economic growth. Finally, you'd be very worried about how these Congressional policymakers would manage the next financial crisis.
Read full article as published in The Huffington Post
___
Kim Schoenholtz is a Professor of Management Practice and Director of the Center for Global Economy and Business.
"Congress Closes Down Fed, Takes Over Monetary Policy"
If you're like us, you'd panic. In short order, you'd think that long-term inflation expectations would rise, pushing bond yields higher. You'd anticipate an increase in the volatility of growth, employment and inflation. That more volatile environment would drive up the risk premium required on new investments, hindering long-term economic growth. Finally, you'd be very worried about how these Congressional policymakers would manage the next financial crisis.
Read full article as published in The Huffington Post
___
Kim Schoenholtz is a Professor of Management Practice and Director of the Center for Global Economy and Business.