Tuesday, February 13, 2007

Quote of the Day

While many people think the Federal Reserve controls interest rates, and some even think the Fed controls the entire economy, in reality, the Fed only controls one policy tool - the amount of money circulating in the economy.

By adding money to, or subtracting money from, the US banking system, the Fed can impact the economy in the short-term, and influence the level of interest rates. But printing money creates no lasting wealth. If it did, counterfeiting would be legal and no nation on earth would experience poverty.

From "Monday Morning Outlook" by Brian S Wesbury; Chief Economist, First Trust Portfolios


At 2/14/2007 12:19 PM, Anonymous Anonymous said...

Back November 6, 2006 the BusinessWeek online stated in the titled article, U.S.: A Do-Nothing Fed Is Looking Less Likely, “PERHAPS THE MOST IMPORTANT question policymakers will grapple with in coming months is this: Is a 5.25% target rate restrictive enough to keep the economy from outgrowing its available labor and production facilities? That is, will current policy keep the economy from overheating? After all, the unemployment rate is already at a five-year low of 4.6%, and the percentage of industrial output capacity in use has stayed above its long-run average of 81% almost all year.” I am studying economics and I’m wondering now that three months has gone by can we answer this question noted within?

At 2/14/2007 12:24 PM, Anonymous Anonymous said...

Hot off the WSJ burner: Feb. 14, 2007

Federal Reserve Chairman Ben Bernanke signaled that he's comfortable with current interest-rate levels but stands ready to raise rates if inflation doesn't moderate as the Fed expects. "So far, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing of core inflation," Bernanke said in prepared testimony to the Senate Banking Committee. The Fed expects GDP growth between 2.5% to 3% in 2007 and 2.75% to 3% in 2008.


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