Central banker’s job is not to prevent recession at any cost but to keep inflation down, to protect the financial system, and to prevent a recession turning into a big slump.
Many hope the Fed will repeat the trick now, just like it did after the dotcom bubble burst. Last time it slashed the rate beyond John Taylor’s recommend then encouraged a house-price boom which offset equity loss and allowed households to borrowing and spending. But to be blamed as the mild recession that breed the current financial trouble.
Some economists believe that recession is the wind of creative destruction and the necessary evil. Recession might be painful with unemployment, lower wages and profit, and bankruptcy, but will weed out inefficient companies and redistribute the capital to new industries. It will be benefit America by purging the excesses of the previous boom and leaving the economy in a healthier state.
“The policy dilemma facing the Fed may not be a choice of recession of no recession. It may be a choice between a mild recession now and nastier one later. Even if a recession were in America’s long-term economic interest, it may be political suicide.”
Will Fed cut the Fed fund rate at 18th of September is still up in the air？
Reference：http://www.economist.com/finance/displaystory.cfm?story_id=9687245
Taylor Rule：http://en.wikipedia.org/wiki/Taylor_rule
No comments:
Post a Comment