Cited: MSNBC

In some circles, any conversation about the U.S. economy is likely to include a tirade about how the U.S. Federal Reserve Bank is overstepping its boundaries and exceeding the scope of its power in trying to revive the fiscal and monetary health of the U.S. economy. This group is decidedly of the mind that the FRB should focus entirely on keeping inflation under wraps while taking care of monetary policy alone. Their  argument is not without merit. On the other hand, FRB Chairman Ben Bernanke and a lot of his colleagues at the Fed are knee-deep into their actions to assist with job creation and economic growth, and he might get even less resistance about his easy money policy and hand in fiscal policy from within the FRB shortly.

Within the greater framework of the Federal Reserve Bank and the governors of the various fed districts represented on the Fed’s policy making committee, are a rotating group of ten voting FRB governors who decide on policy changes and approaches taken by the U.S. central bank. When the FRB meets for the first time this year, the voting members on the open-market will change and analysts expect that the new governors will be more likely to side with Chairman Bernanke than some of their colleagues who voted against many of his proposals last year. In fact, during the last round of action taken by the Fed to buy longer term securities on the open market in an effort to lower long term interest rates, a policy called quantitative easing, three of the ten voters dissented, the first time this has occurred in over twenty years of policy at the FRB.

There is a worry among many Fed governors as well as public and private industry analysts, lawmakers, and academics, that all of the stimulus packages being thrown at the economy in an effort to revive growth and put more people back to work will have the unintended consequence of sparking inflation in the not-too-distant future. And they fear that once that genie is out of the bottle, there’s no getting it back in.

The Fed governors that voted against Bernanke’s quantitative easy plan are now being rotated out of open policy committee and their replacements are said to be much more in line with the view that the Fed, while primarily charged with the monetary health of the economy, must continue to provide liquidity to the financial system while keeping interest rates under wraps for the foreseeable future.

My take:

At some point the Fed is pushing way to far, pushing on a string as it were. Perhaps the emphasis should be on putting some pressure on the financial community to take some of the capital that they are being given at or near zero percent interest rates from the FED and put it to work in the economy. They are using the funds to line their pockets, which is not the intention behind the Fed’s easy money policy. Right now inflation isn’t much of a problem with productivity worldwide increasing but part of that is because of the complete gutting of the middle class and their ability to demand a living wage.