Kevin Wrash, a former Federal Reserve Governor, has done an important important development Central Bank of the US Bank Last month, he accused him of the mission crawled with severe consequences for the economy and its general situation.
April letter,, Which was delivered in Washington, DC, to a group of simple economic figures known as Group 30, was partially declining because Warsh from the previous interior in the federal reserve; It deserves some credit for providing suspicion of an isolated institution in general. It is also important because Warsh may soon manage the Federal Reserve. It is widely considered a A leadership competitor for this job When Jerome Powell’s leadership ends next year, according to what was stated, the president advised the periphery of the Central Bank’s issues.
The former Federal Reserve Governor accused the Federal Reserve of the distraction and contradiction that led to the outbreak of inflation, a major deficit in the federal budget, and the damage of its independence. Warsh concluded her problems to a large extent, vibrating and riding in order to “reset a strategy” of the Central Bank.
He told Al -Tadam newspaper: “Institutional erosion coincided with the failure of the Federal Reserve to meet an essential part of its legal competence and the stability of prices.” “It also contributed to the explosion of federal spending. The huge Federal Reserve and the weak performance have weakened the important issue and the independence of monetary policy.”
Criticism raises a clear question in two parts: Is it right, and what criticizes his criticism of the institution that seems to want to run?
Warsh’s novel may be an attractive to the president and the political base that places the elites and institutions they run in the essence of American economic and social diseases. Among other things, Warsh argued with elaborate, the Federal Reserve took his attention from the problem of inflation because he was distorting his attention from issues such as climate change, diversity and integration, and the central regret of the Trump movement.
Hook inflation
On the practical level, Warsh’s economic views do not seem to line up well with the views of the man who is considering using it. President Trump is a “pigeon” that wants to decrease interest rates to enhance economic growth and reduce interest burden on government debt. Warsh has a “falcon” behavior, which says the Federal Reserve should focus on maintaining inflation, which tends to high interest rates. This is a possible recipe for the conflict if it gets the job.
On criticism and sprinkle the material has holes.
The Federal Reserve is accused of taking its eye from the task of inflation, but it did not mention the fact that the Federal Reserve has blocked the target of inflation by 2 % in 2012. The goal of inflation was essential in its political decisions. The interest rate decision has not taken into account the climate change. This is not a guess; Discussions It was placed in the texts of large -scale meetings Anyone reads.
As for diversity and integration, history indicates that minority residents work well when the Federal Reserve achieves its goals of inflation and low and stable unemployment. The fact that the Federal Reserve has realized that the reality does not necessarily make the central bank wake up or distract it.
This is not an apology for the study of the federal reserve. I have made dependency errors over two decades of economic turmoil. The financial system almost collapsed in 2008 with the central bank on the organizational clock. After that, for a decade from 2012 and 2022, the inflation routinely ran to less than the federal reserve goal while unemployment rises. Then after the Covid crisis, the inflation rose, and its largest increase has recorded since the large inflation in the 1970s.
The war of a little time is to study the economic context in which the central bank has been spent. Her options did not occur in a vacuum.
The single economic event in the quarter -century was a trauma in China, as the world’s most populous nation has become an economic power, as the world was flooded with cheap products and its own savings. This mixture created low inflation and low interest rates for the largest commercial partner in China – the United States.
As far as he dates back to 2004, Federal Reserve Chairman Alan Greenspan expressed his vitality about the fact that when short -term interest rates raised, the long -term interest rates decreased. A long time before the Federal Reserve subscribed to US Treasury bonds in its quantitative mitigation programs, China was buying it, and recycling the dollars it gained from selling shares, sports shoes and phones in the debts of the United States. It was like a great agent financing program that kept interest rates and low prices for American consumers.
China and trade in the G30 cash from Warsh from the Federal Reserve.
Then, a financial crisis is partially driven by these low interest rates that crushed lives and animals. During the 2010 decade of 2010, the average American inflation reached 1.5 %, as it was continuing with the goal of the Federal Reserve by 2 %, despite its efforts to enhance the economy. A decade of low inflation was also constantly mentioned in Washington’s speech in Washington.
History shows that a more honest approach was not necessarily a profitable strategy. During this grinding contract, the European Central Bank initially tried to approach the most conservative interest rates that Warsh appears to have called for. The unemployment rate continued to rise during its self -austerity, while unemployment in the United States slowly decreased without causing inflation.
Blame the Federal Reserve Bank
Powell Fed used the tools developed during the 2010 long recession to address the Covid crisis, reduce interest rates and launch new programs to buy bonds. Powell is anxious that the 2008 crisis will be re -operated, which led to a long period of high unemployment. But this was a different kind of shock. And hit global supply chains, not local credit. It was more like a hammer to a problem that required pain, and a serious mistake in judgment, but it is not clear that it is an error in the intention or institutional task.
The rabbit analysis of this context greatly ignores. At the time of Covid, it is also worth remembering, supported the work of the aggressive Fed Action, including the broad lending program for the private sector, which he said could be called.Government credit facilities“
He blames the Federal Reserve to enable the large budget deficit in the United States with low interest rates and bond purchase, without the elected politicians on both parties who wrote the actual budgets. The imposition of responsibility for fiscal policy on the central bank will be exactly the type of task preceded by Warsh. Its function is supposed to be bound by inflation and employment.
At another stage, Warsh said that the Federal Reserve did not recover its steps on large bond purchase programs. This is completely incorrect. Its purchases have not been fully recovered, but the Federal Reserve has shrunk from $ 4.5 trillion to $ 3.8 trillion after quantitative programs in 2010, and from 9 trillion dollars to 6.7 trillion dollars recently. One may differ with the pace of these steps, its strategy, or practical application, but it is not precisely to say that the federal reserve has not recovered its steps.
The potential president is the right that the central bank deserves scrutiny. I have made mistakes with severe consequences for the American people, and could be spared to ask difficult and decisive questions. It is also worth the courage to finish the federal reserve function in 2010 when it differed with its options.
It is difficult to win his analysis with the actual federal reserve bank errors, and it is difficult to photograph his declared intentions with the options that the president seems to intend to get out of the upcoming Central Bank leader.
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