Friday, November 17, 2017

The Most Dangerous Federal Reserve Bank President

Almost every regional Federal Reserve Bank president has some nutty pet proposal that would send the economy spinning in a crazed and dangerous direction, but none of the others come close to matching the crazed proposals of San Francisco Federal Reserve President John Williams.

During a speech at the 2017 Asia Economic Policy Conference held here in San Francisco yesterday, Williams suggested that during the next recession the Federal Reserve might have to:

  • Unconventional policy tools (e.g. quantitative easing)
  • Take interest rates negative
  • Increase the target price inflation rate
  • Implement a new fangled concept  "Price level targeting"
  • Nominal income targeting
And, I am not making this up, he managed to call for all of these in one paragraph:
[T]here are a number of potential alternative strategies to cope with a low natural rate of interest. One approach is to plan on relying on unconventional policy tools, that is, follow the same playbook as during this past decade and hope that suffices. A second is to find ways to make the lower bound more negative, giving conventional monetary policy more room to maneuver. A third is to raise the inflation target.And fourth is to modify inflation targeting by moving to a price level or nominal income target.
The year isn't up, but I am calling it, with this statement Williams is the 2017 winner of the Most Dangerous Federal Reserve President Award. Let's hope the other monetary policy committee members don't take him seriously.


1 comment:

  1. John "6 rate hikes in 2016" Williams? This guy has been the Fed class clown for a while now.
    -- Hollow Daze