Federal Reserve Holding Course : Obama's Man In House

I believe the true intentions of the Federal Reserve is to make sure the economy does not decline before the next election which could bring the government into the hands of Mr Obama enemies, the Republicans.

To believe the fed chairman is not controlled by Mr Obama and the Democrat party is to believe Mr Obama means us all no harm. Not true. Given that the chairman indicated he might start to cut back on the purchases of bonds saw the stock market take a tumble, not the he would do this, it was just that he might.

Well he changed course in a hurry indicating he would continue on the same course of purchasing more then $85 billions of bonds each month at least until the economy turned around sufficiently. We all know the economy will not turn around as long as Mr Obama has anything to say about it.

The economy is doing just what Mr Obama wants it to do, fail, and the fed chairman is doing exactly what he has  been told to do.

Fed Policy: Good Intentions, Risky Consequences
Source: Charles I. Plosser, "Fed Policy: Good Intentions, Risky Consequences," Cato Journal, Fall 2013.
September 30, 2013

Some of the actions the Federal Reserve has taken to address the financial crisis and the slow economic recovery, while well intentioned, have created some long-term risks for the economy and for the Fed as an institution. Excessive focus on the short term can result in long-term problems.

Avoiding these risks is dependent on the Fed executing a graceful exit from this period of extraordinary accommodation. Such an exit depends on the Fed's ability to be systematic and transparent about its policy decisions, says Charles I. Plosser, president and chief executive officer of the Federal Reserve Bank of Philadelphia.

Four monetary policy principles that Plosser suggests:

• The first principle is to be clear and explicit about the goals and objectives of policy. And in so doing, policymakers must acknowledge what policy can and cannot achieve.
• The second principle is for policymakers to make a credible commitment to their goals by describing how they will conduct policy in a way that is consistent with those goals. One way to do this is for the central bank to articulate a reaction function or rule that will guide policy decisions.
• The third principle is to be clear and transparent in communicating to the public the policy actions that are taken.
• The fourth principle is to strive to ensure central bank independence.

Over the past several years, the Fed has taken some beneficial steps toward increased transparency, which will serve the economy well now and in the future. The Fed should continue on this path by more clearly articulating a systematic approach to policymaking, centered on using robust simple rules as guides to both its policy decisions and the way in which it communicates those decisions.