The GOP presidential field opposes reappointing Federal Reserve Chief Ben Bernanke not because he has held the reins on the money supply too tightly, but because they think he has been too loose with them. Rick Perry has said it would be “almost treasonous” for the Federal Reserve to do more to reduce unemployment. And in a previous post, I lamented that no one on the Fed seemed to be arguing for more aggressive action. Well, Chicago Fed Chief Charles Evans has now stepped up to the plate, God bless him:
One of the main reasons that the labor market recession has lasted so long is that relatively few people in office genuinely seem to want to end it. An important exception to that is Chicago Federal Reserve President Charles Evans who’s becoming increasingly vocal about the need for additional monetary stimulus and delivered an excellent speech on this subject earlier today. His bottom line that “if 5% inflation would have our hair on fire, so should 9% unemployment” is a straightforward reading of the Fed’s statutory mandate but seems all too rare.
(via Matt Yglesias.) Those who’ve been following the policy debate among economists should read Matt’s piece in full. Evans makes the important point that Ken Rogoff’s study about how prolonged recessions following on the heals of financial crashes usually are, is not a prediction of what must inevitably occur, rather it is an argument for a sounder policy response of the sort that Evans is now calling for. Here’s Evans:
[The experience of prolonged recessions following financial crashes] highlight a challenge we face today, but from the standpoint of the underlying economic analysis, there is nothing pre-ordained about these outcomes. They are not theoretical predictions—rather, they are reduced form correlations. The economy can perform better than it did in these past episodes if policy responds better than it did in those situations.