Fed Musings
I’m going to post a short series on The Federal Reserve, its mandates and some of the consequences. The stated mandates of the Federal Reserve, an institution which is neither federal nor has reserves, are laid out in section 2A of the Federal Reserve Act (as amended) the triple (not dual as so often is stated) goals are : " to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates ”. With regard to stable prices note that on February 25 th , 2012 Dr. Bernanke announced that the Fed’s inflation target was 2% because it was best aligned with the mandated goals of full employment and price stability. The first observation is that Dr. Bernanke appears to be doing congress’s job by changing the mandate of stable prices without any apparent instruction to do so from congress. An inflation target other than zero by definition means that prices are not stable. If balance in your Certificate of Deposit went down by 2% per