A Quote by Janet Yellen
New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns.
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The Global Financial Crisis and Great Recession posed daunting new challenges for central banks around the world and spurred innovations in the design, implementation, and communication of monetary policy.
From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial 'boom' followed by a recession or depression when the Fed-created bubble bursts.
If the Federal Reserve pursues a policy which Congress or the President believes not to be in the public interest, there is nothing Congress can do to reverse the policy. Nor is there anything the people can do. Such bastions of unaccountable power are undemocratic. The Federal Reserve System must be reformed, so that it is answerable to the elected representatives of the people.
Importantly, in the 1930s, in the Great Depression, the Federal Reserve, despite its mandate, was quite passive and, as a result, financial crisis became very severe, lasted essentially from 1929 to 1933.
Transparency concerning the Federal Reserve's conduct of monetary policy is desirable because better public understanding enhances the effectiveness of policy. More important, however, is that transparent communications reflect the Federal Reserve's commitment to accountability within our democratic system of government.
I think the ethos for Gov. Romney is to use a whole variety of policies, of which tax policy is one, to try to raise the rate of growth. We've had a recovery from the financial crisis that would be well below what one might normally expect for a recovery from such a deep recession. And to counteract that we need better tax policy.
Millions of Americans were duped by the federal government and the Federal Reserve into buying homes they could not afford and failed to count the cost. When the financial crisis of 2008 hit, they could not keep up the monthly mortgage payments and defaulted.
The Federal Reserve ranks among the most transparent central banks. We publish a summary of our balance sheet every week. Our financial statements are audited annually by an outside auditor and made public. Every security we hold is listed on the website of the Federal Reserve Bank of New York.
Starting in late 2007, faced with acute financial market distress, the Federal Reserve created programs to keep credit flowing to households and businesses. The loans extended under those programs helped stabilize the financial system.
Beyond monetary policy, fiscal policy has traditionally played an important role in dealing with severe economic downturns.
Believing that a crisis is a useful thing to create, the Obama administration - which understands that, for liberalism, worse is better - has deliberately aggravated the fiscal shambles that the Great Recession accelerated.
Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.
In 1977, when I started my first job at the Federal Reserve Board as a staff economist in the Division of International Finance, it was an article of faith in central banking that secrecy about monetary policy decisions was the best policy: Central banks, as a rule, did not discuss these decisions, let alone their future policy intentions.
By rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.
The financial crisis and the Great Recession demonstrated, in a dramatic and unmistakable manner, how extraordinarily vulnerable are the large share of American families with very few assets to fall back on. We have come far from the worst moments of the crisis, and the economy continues to improve.
The Federal Reserve is not currently forecasting a recession.
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