from The Daily Bell:
The Fed’s phony mandate … How many times have we heard top Federal Reserve officials solemnly invoke the Fed’s “dual mandate” as the be-all, end-all justification for their monetary policy decisions? … But the so-called dual mandate was not exactly written in stone, it turns out. Rather, it has survived as a disturbing legislative artifact from some 40 years ago — when a congressional resolution was put forward to make the Federal Reserve answerable to the White House. – The Hill
Dominant Social Theme: The Fed needs to be reined in. Its actions need to be calibrated. Its results need to be further focused.
Free-Market Analysis: Here’s an analysis by The Hill that is half right. The part that is wrong we’ll mention later in this analysis. The part that is right we’ll discuss now.
The Hill is not exactly a muckraking publication but in this exposé it provides us with a good history lesson.
In fact, we learn the Fed‘s dual mandate is actually a triple mandate and that the third part of the mandate is simply ignored by the Fed.
The Humphrey-Hawkins Act … decreed that the inflation rate should be brought down to zero by 1988; that the federal government should achieve and maintain a balanced federal budget; and that the United States should promote a “sound and stable international monetary system.”
The legislative language amending the Federal Reserve Act explicitly directs the Fed to aim its efforts at achieving not two, but rather three objectives, i.e., “to promote the goals of maximum employment, stable prices, and moderate long-term interest rates.”
The article points out that the Fed is obviously operating under triple mandate not a double one. Additionally, the reason the third mandate is not mentioned is because building and sustaining “moderate” long-term interest rates is not something the Fed has been able to accomplish – if it even wished to try.
Give the article credit. Having exposed the “third mandate,” the narrative becomes blunt and even savage. It uses the word “nonsensical” to describe the Fed’s actions and begins to pick apart the logic behind them.
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