Wednesday 26 March 2014

Stein of the Fed advocates high unemployment so as to save Wall Street.




Jeremy C Stein in this recently published article advocates a relatively high level of unemployment because full employment and a booming economy tempts Wall Street into taking risks. His opening paragraph says:
“…should financial stability concerns, in principle, influence monetary policy decisions? To be specific, are there cases in which one might tolerate a larger forecast shortfall of the path of the unemployment rate from its full-employment level than one would otherwise, because of a concern that a more accommodative policy might entail a heightened risk of some sort of adverse financial market outcome? This question is about theory, not empirical magnitudes, and, in my view, the theoretical answer is a clear "yes."”
High unemployment so as to stop banksters behaving irresponsibly? Now if that’s not a damning indictment of the existing banking system, then I don’t know what is.
Of course you don’t have to accept my interpretation of what Stein is saying. You’re free to read his article and then leave a comment below telling me I’ve got it all wrong.

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