One of the problems with the Fed is that they tend to combat the problem that prevailed when they were young men. Thus, they were far too slow reacting to inflation in the 70s, because unemployment had been the big problem of the governors’ Depression youths. Now they are fighting non-existent inflation because it was the big problem when Greenspan served in the Ford Administration.
I wonder just what it would take to get Greenspan to admit that inflation isn’t the beast it was in the past?
Personally, I’m rather fond of the idea that Milton Friedman suggested last year in an interview:
“I’ve always been in favor of replacing the Fed with a computer.” In essence, a PC could determine the economy’s monetary base and consistently increase it by, say, 3 percent annually. “That amount of money would be created and distributed, either by buying up government securities or by financing current government expenditures,” Mr. Friedman explains. “It would do that week after week, month after month, hopefully year after year.”