January 29, 2008
Pressuring the Fed
The Federal Reserve “has rarely been popular,” says Robert Samuelson in The Washington Post. But its “most vocal critics” used to be unions and political and business leaders. “No more.” Now we’re in the age of “financial populism,” driven by Jim “Mad Money” Cramer and a cohort of “money managers, commentators, and economists” who think the Fed should “somehow guarantee that the economy always expands and that stock prices always rise.” Today’s Fed has to operate in this “echo chamber,” where reality is shaped by repeated, short-sighted market “views.” So when “the market” says we’re in “dire shape,” the Fed almost has to act. Are we in a crisis? “Who knows?” Not Jim Cramer.
Well, Fed Chairman Ben Bernanke needs to “man up,” says Paul La Monica in CNNMoney.com. Since September, the Fed has looked increasingly easy “to push around,” and last week’s 75-point cut was like “shoving a pacifier in a crying baby’s mouth.” And Wall Street is “whining” for yet another cut on Wednesday. We’re close to going “too far.” The Fed has two mandates: keeping prices stable and supporting growth; “keeping the markets happy is not a new third mandate.” Inflation is far from “dead” as a concern, given rising commodity prices. So, note to the Fed: “Pull a page from Tony Danza’s book and show investors who’s the boss.”
of The Week magazine.