As an educator myself, I understand the profound effect that good teachers and a quality education have on the lives of our young people.
Stronger regulation and supervision aimed at problems with underwriting practices and lenders’ risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates.
No economy can succeed without a high-quality workforce, particularly in an age of globalization and technical change.
The best solution to income inequality is providing a high-quality education for everybody. In our highly technological, globalized economy, people without education will not be able to improve their economic situation.
Clear communication is always important in central banking, but it can be especially important when economic conditions call for further policy stimulus but the policy rate is already at its effective lower bound.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
The economist John Maynard Keynes said that in the long run, we are all dead. If he were around today he might say that, in the long run, we are all on Social Security and Medicare.
Every effort needs to be made to try and offset the costs of Katrina and Rita by reductions in other government programs, especially those that are wasteful, duplicative and ineffective.
There are a number of institutions globally where the Federal Reserve typically leads the U.S. effort to work with financial regulators from other countries, and we try to, to the extent possible, establish international standards for how – the amount of capital a bank should hold, for example, or how much.
Because financially capable consumers ultimately contribute to a stable economic and financial system as well as improve their own financial situations, it’s clear that the Federal Reserve has a significant stake in financial education.
When the economic well-being of their nation demanded a strong and creative response, my colleagues at the Federal Reserve… mustered the moral courage to do what was necessary.
To be sure, faster growth in nominal labor compensation does not necessarily portend higher inflation.
In many spheres of human endeavor, from science to business to education to economic policy, good decisions depend on good measurement.
If two people always agree, one of them is redundant.
Fostering transparency and accountability at the Federal Reserve was one of my principal objectives when I became Chairman in February 2006.
I come from Main Street, from a small town that’s really depressed.
Deflation can be particularly dangerous when a financial system is shaky, with household and corporate balance sheets in poor shape and banks undercapitalized and heavily burdened with bad loans.
When historical relationships are taken into account, it is difficult to ascribe the house price bubble either to monetary policy or to the broader macroeconomic environment.
The more guidance a central bank can provide the public about how policy is likely to evolve the greater the chance that market participants will make appropriate inferences.
The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being.
I’ve never been on Wall Street. And I care about Wall Street for one reason and one reason only because what happens on Wall Street matters to Main Street.
Obviously, I haven’t succeeded in defusing the political concerns about the Fed.
I got into economics because I wanted to make things better for the average person.
All the Federal Reserve can do is make loans against collateral.
Many savers are also homeowners; indeed, a family’s home may be its most important financial asset. Many savers are working, or would like to be.
I would argue that no financial instrument counted as regulatory capital should be allowed to receive any protection from losses.
Since World War II, inflation – the apparently inexorable rise in the prices of goods and services – has been the bane of central bankers.
If I am confirmed, I am confident that my colleagues on the Federal Open Market Committee and I will maintain the focus on long-term price stability as monetary policy’s greatest contribution to general economic prosperity and maximum employment.
The Federal Reserve, like other central banks, wields powerful tools; democratic accountability requires that the public be able to see how and for what purposes those tools are being used.
It takes about two and a half percent growth just to keep unemployment stable.
After the 1929 crash, the Federal Reserve mistakenly focused its policies on preserving the gold value of the dollar rather than on stabilizing the domestic economy.
If bankers become overly conservative in response to past lending mistakes – or if examiners force such behavior – it will hurt bankers’ own long-term interests and the economy in general.
The banks have accounts with the Fed, much the same way that you have an account in a commercial bank.
I think one of the lessons of the Depression – and this is something that Franklin Roosevelt demonstrated – was that when orthodoxy fails, then you need to try new things. And he was very willing to try unorthodox approaches when the orthodox approach had shown that it was not adequate.
Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly.
Our financial system is so complicated and so interactive – so many different markets in different countries and so many sets of rules.
If Australia finds it has a strong Australian dollar, and it has higher unemployment, then it would have to respond, and that would either be by increasing domestic demand or by weakening its own currency.
At the most basic level, a central bank must be clear and open about its actions and operations, particularly when they involve the deployment of public funds.
If you are not happy with yourself, even the loftiest achievements won’t bring you much satisfaction.
Different countries have different kinds of financial structures.
To minimize market uncertainty and achieve the maximum effect of its policies, the Federal Reserve is committed to providing the public as much information as possible about the uses of its balance sheet, plans regarding future uses of its balance sheet, and the criteria on which the relevant decisions are based.
Following an extended boom in housing, the demand for homes began to weaken in mid-2005. By the middle of 2006, sales of both new and existing homes had fallen about 15 percent below their peak levels. Homebuilders responded to the fall in demand by sharply curtailing construction.
Because a person has to be either working or looking for work to be counted as part of the labor force, an increase in the number of people too discouraged to continue their search for work would reduce the unemployment rate, all else being equal – but not for a positive reason.
The Fed needs an approach that consolidates the gains of the Greenspan years and ensures that those successful policies will continue – even if future Fed chairmen are less skillful or less committed to price stability than Mr. Greenspan has been.
There are limits to monetary policy.
The public in many countries is understandably concerned by the commitment of substantial government resources to aid the financial industry when other industries receive little or no assistance. This disparate treatment, unappealing as it is, appears unavoidable.
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