Tuesday, August 29, 2006

Fed Funds Folly

The Federal Reserve targets the Federal Funds rate in its efforts to control growth and inflation in the US economy. I have no idea why they think this will be successful as every effort at central economic planning in the history of the world has failed. How can a group of bankers and economists possibly expect to devine the demand for and proper supply of money in an economy as diverse as the US? I guess when your only tool is a hammer......Anyway, economist Paul Hoffmeister has an article in National Review Online about the futility of Fed Funds Targeting.

The evidence suggests that the recent fed funds targeting experiment has wholly failed in effectively restraining money-supply growth in relation to money demand. Attention should instead be focused on calling for the Fed to directly intervene in the open market by selling bonds to drain enough liquidity so as to cause gold to fall back to a non-inflationary level of $400 an ounce.

Click on the title to read the entire article.

No comments: