Re: Can the Fed set the long-rate?

[Randy Wray <lwray@xxxxxx>]

doug
i think you can anticipate my response. i seriously doubt that the fed
has a more "correct" view than the top economists. there was a belief
(which is still dominant; even more dominant!) that the fed can
finetune the economy. it is of course wrong. but it guides behavior.
randy
>
> Randy Wray wrote:
>
> >doug
> >the fed wanted to try to "fine tune" the economy thru countercyclical
> >interest rate adjustments, thus, abandoned the "peg".
>
> Ok, let me be more explicit then. A Marxian view of central banks is that
> they're ruling class institutions - ones capable of taking a much longer
> view than market participants, but still responsive to r.c. preferences. In
> this case, the r.c. didn't want the Fed to keep long rates "artificially"
> low. Many PKs seem not to share this class analysis, apparently believing
> that the central bankers are simply in the grip of bad axioms. But not
> wanting to attribute anything to anyone, I want to hear Paul and others
> offer their explanation of why the Fed abandoned the peg.
>
> Doug
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