Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much.
With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.
If you want to understand geology, study earthquakes. If you want to understand the economy, study the Depression.
Importantly, in the 1930s, in the Great Depression, the Federal Reserve, despite its mandate, was quite passive and, as a result, financial crisis became very severe, lasted essentially from 1929 to 1933.
Economics is a very difficult subject. I’ve compared it to trying to learn how to repair a car when the engine is running.
If you are not happy with yourself, even the loftiest achievements won’t bring you much satisfaction.
The Federal Reserve will not monetize the debt.
The economic repercussions of a stock market crash depend less on the severity of the crash itself than on the response of economic policymakers, particularly central bankers.
It takes about two and a half percent growth just to keep unemployment stable.
Indeed, in general, healthy investment returns cannot be sustained in a weak economy, and of course it is difficult to save for retirement or other goals without the income from a job.
Education – lifelong education for everyone – from toddlers to workers well advanced in their careers – is indeed an excellent investment for individuals and society as a whole.
It is not the responsibility of the Federal Bank – nor would it be appropriate – to protect lenders and investors from the consequences of their decisions.
Under a cold turkey strategy, at each policy meeting the Federal Open Market Committee would make its best guess about where it ultimately wants the funds rate to be and would move to that rate in a single step.
If you are asking me if I would advocate that the Chinese go to greater flexibility in their exchange rate, I certainly would.
We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.
I think one of the lessons of the Depression – and this is something that Franklin Roosevelt demonstrated – was that when orthodoxy fails, then you need to try new things. And he was very willing to try unorthodox approaches when the orthodox approach had shown that it was not adequate.
I generally leave the details of fiscal programs to the Administration and Congress. That’s really their area of authority and responsibility, and I don’t think it’s appropriate for me to second guess.
The Fed is totally open.
The amount of currency in circulation is not changing. The money supply is not changing in any significant way.
The American people are among the most productive in the world. We have the best technologies. We have great universities. We have entrepreneurs.