Kerby Anderson
Earlier this month the Federal Open Market Committee of the Federal Reserve cut the short-term interest rate target by 50 basis points. The financial world was waiting to see what Federal Reserve Chairman Jerome Powell would announce. Even after it happened, commentators were contrasting the words of Powell with his actions and suggesting he was more worried than he sounds.
Guests that I have had on my radio program like to make interesting comments about the Federal Reserve. The Federal Reserve, they might say, isn’t a federal agency and has doubtful reserves. Another might say that the Chairman of the Federal Reserve is the most powerful person in America. What should we think about all of this?
The Federal Reserve has a dual mandate to keep inflation low (at 2%) and to also keep unemployment low. It engages in what is called “monetary policy” in an attempt to achieve those two goals. This central bank was established in late December 1913. If you want to read how it was created, you might want to read the book, The Creature from Jekyll Island, which is now in its fifth edition.
As I have talked about in previous commentaries, the Federal Reserve has had to “print” money to finance the massive government spending during these last few decades. In one interview, Jerome Powell explained they “have the ability to create money digitally, and we do that by buying Treasury Bills or bonds or other government guaranteed securities.” He also added in another interview that the Federal Reserve has become the most important factor in the global economy.
Last year, the Wall Street Journal wrote that Jerome Powell has become the most powerful economic voice in America. Perhaps now you can see why so many people pay attention to what Jerome Powell says and what the Federal Reserve does.
This post originally appeared at https://pointofview.net/viewpoints/federal-reserve/?utm_source=rss&utm_medium=rss&utm_campaign=federal-reserve
