Get Real, Monetary Policy

Last week, the House Financial Services Committee held hearings on Federal Reserve reform. Maybe the Fed could explicitly follow monetary policy rules, or become subject to conventional audits, or be the subject of a commission reflecting on its hundred-and-one years of performance. These were some of the ideas floated. Warhorses including the old International Monetary Fund hand Simon Johnson were there to say no way: everything will go haywire if you change a thing with the Fed.

Sure, Professor Johnson. Rules, for example. These could turn out to be scary. Back when the Fed had to think about things like gold-cover ratios, all the economy had to show for it was postwar prosperity after World War II, the most legendary experience of economic abundance the world has ever seen.

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