Happy 100th birthday
This year marks the 100th birthday of the Federal Reserve. But opinions vary on whether we should celebrate or regret this milestone. N.C. State University economist Mike Walden explains.
“The Fed was controversial when it was created, and it still is. It was created as a backstop to the financial system − the financial system is very intertwined. It’s really necessary for our economy to function, for people and businesses that have access to credit.
“But historically the financial system has been subject to booms and busts. And so the Fed was created to try to moderate these issues. It was also created to try to head them off, so some would say that the Fed ‘s real job is to anticipate these booms and busts and take appropriate action.
“Now, of course, the Federal Reserve has been extremely active in the last five years when we had the financial meltdown. One worry is whether the Federal Reserve’s methods that they’ve used over the last five years are going to lead to higher inflation, because the Fed has created a large amount of money in dealing with these financial issues.
“So the bottom line here … is some will cheer the Federal Reserve ‘s birthday, saying it’s a necessary part of a modern economy. Others will boo it.”Category: Economic Perspective