Monday, January 20, 2014
Do you take it for granted like I do, that we have such a stable banking system in the United States? I was reminded why we have such a stable banking system by Dr. Plosser when I heard him speak at LaSalle University’s Economic Outlook luncheon on 1/14/2014.
Dr. Plosser gave us his Perspective on the Economy and Monetary Policy…. He made a point that he was giving us his opinion and not the opinion of the Open Market Committee which he serves on.
We were refreshed on the history of the Federal Reserve which was created by Woodrow Wilson in 1913. Congress sets its goals, and the last time the goals were set was 1978. One thing unique about our central bank is that it is comprised of12 regional banks for diversity. There were over 400 + people there and a reporter from Wall Street Journal, and one reporter from Bloomberg News.
After insights into the History of the Federal Reserve he shared his opinion on Monetary Policy such as our 3rd round, QE3. It was reassuring to hear that he thinks the economy has already met the criteria of substantial improvement, and we should conclude the asset purchases. And then we should plan policy for after QE3.. It was interesting to hear his list of Objectives. A question he raises with reference to the Objectives outlined is “Do we have the will to do it?” You can read the details here.
Here are some interesting and reassuring comments from the Question and Answer period.
Question – How will increases in interest rates effect housing Market?
Answer – “Still extraordinarily low interest rates.”
Question – On Labor …..4th quarter 2007 beginning of the recession.. 70% decline in labor force….retiring and /or disability…some of this maybe reflecting the demographics of our society…
Question – Can the Fed lose Money with QE 3?
Answer – Mostly a paper loss ..It’s pretty hard for the printer of dollars to lose dollars..
Question – How important does the Fed consider International in Monetary Policy? – Domestic Decision about US dollar….”A strong US economy is good for the rest of the world.” It is an integrated world, and we think about these things.
Question – Will the Fed better anticipate the next crisis?
“…Nature of a crisis is that you missed it.” “It is unwise to think that you can regulate a crisis away…..best thing is to use Monetary Policy and try to keep stable, predictable, and measured…”Better to try to get Market Place to discipline financial institutions versus managing…
Question – Response to promotion of Bit Coin ? I think he look at it as another method of payment and no threat to the US dollar.
Answer – “Not in my lifetime.”….It is another form of payment system…..Technology allows our system to become more efficient….
Question – Where do you see domestic manufacturing, durable goods?
Answer – Car manufacturing improving.. Philadelphia survey seems to indicate man…….
Question – Is FOMC buying short term assets?
Answer – Only buying long term assets three years plu. The average term is 7 years.