The Fed's Mandates and the Coming Scenario

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates." Often referred to as the "Dual Mandate" of the Federal Reserve, remarkably I count three mandates in that mission statement. Maximum Employment Stable Prices Moderate Long-Term Interest Rates Regarding stable prices, Federal Reserve Chairman Bernanke has said on multiple occasions that he seeks 2% (or more) core inflation.  In 2011, the Consumer Price Index rose over 3%.  At a 3% annual, and compounded, prices in the United State will double every 24 years.  This seems like a failure of attempting to achieve price stability.  Even at 2%, the alleged target, prices double every 36 years.  The question is, why this...(Read Full Article)

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