The Fed Mentioned “Inflation” Ten Times More than “Unemployment” in 2008

Many Fed watchers have long said that the board, with is charged with the “dual mandate” of ensuring stable inflation and employment, does not actually pay equal attention to the two. In fact, a couple of weeks ago, I wrote that it would beyond the pale to say that these rich former bankers and economists, who exclusively mingle with other rich bankers and economists, take the interests of their friends in not seeing their massive fortunes eaten away by inflation more seriously than the interests of most American people who would like to see a strong labor market.

I was kidding of course, that is a huge part of the problem. Ryan Avent at The Economist got tired of analyzing how the Fed’s policies would accomplish their goal, and instead just counted words from the 2008 transcripts of meetings during the Financial Crisis. Avent found that the Fed cares ten times more about inflation than unemployment:

I don’t know how much more there is to say about this, so I’ll let Kevin Drum do it for me:

 I don’t think this comes as much of a surprise to anyone, since it’s been obvious for decades that the Fed not only doesn’t care about unemployment, but gets positively worried when too many people have jobs. That would mean the labor market is tight and workers might get paid more, you see, and that could be inflationary.

And we wouldn’t want most Americans to win out over the friends of rich banksters and economists!

Federal Reserve Stays The Course on Taper, Interest Rates

The Fed’s meetings this week resulted in another round of tapering, which was an expected, if unnecessary and counterproductive, move. This month, the government will buy $65 billion worth of bonds, as opposed to the $75 billion it bought in the previous month. Prior to that, it had been buying $85 billion worth of bonds per month as part of the “Quantitative Easing” program that most economists believe to have had a positive effect on growth and the unemployment rate.

Importantly, it has not yet had much effect on inflation, which remains historically low and is the key worry when the fed is increasing the money supply. At the same time, unemployment remains stubbornly high, with the most persistent gains coming from workers dropping out of the workforce.

However, “In an official statement, the Fed sounded more upbeat about the economy, noting the data since it last met in December “indicates that growth in economic activity picked up in recent quarters.” As we discussed earlier, 95% of that “growth in economic activity” has been going to the top 1% since the financial crisis- the average American has not felt the affects and they need MORE growth.

Instead, the Fed is taking the cautious course simply for caution’s sake. One can only hope that new Chairwoman Janet Yellen will steer the Reserve Board in a much more dovish direction than this, but seeing as she was the number two in the organization up until her ascension this week, that seems unlikely.

On the bright side, though, Yellen does seem sympathetic to keeping interest rates near all time lows, as they have been since the financial crisis. This could be the more important driver for the recovery, as it has been more of a traditional measure that the federal reserve uses to slow down or speed up the economy as it sees fit. Quantitative Easing had not been tried before when it was introduced by outgoing Fed Chairman Ben Bernanke, who was nominated by President George W. Bush.