A Roadmap to Monetary Policy Reforms
by Norbert Michel
We now have a 100-year history by which to judge the Federal Reserve’s performance. On balance, the Fed has not increased economic stability relative to the pre-Fed era. The Great Depression, the great stagflation, and the 2008 financial crisis have all occurred on the Fed’s watch. Even excluding the Great Depression, business cycles have not become appreciably milder, nor have recessions become less frequent or measurably shorter. Norbert Michel argues “The Fed has strayed so far from the classic prescription for a lender of last resort—to provide short-term funds to solvent institutions at penalty rates—it strains all reason to suggest that it has successfully fulfilled that function.” In the article, Michel puts forward a direction for policymakers to begin addressing these issues.