Federal reserve independence |
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| Institution: | 1. Tepper School, Carnegie Mellon University, Pittsburgh, Pa 15213, USA;2. Hoover Institution, USA;1. Department of Hepatobiliary Surgery, The First People''s Hospital of Foshan, Guang Dong, China;2. Department of Statistics, The First People''s Hospital of Foshan, Guang Dong, China;3. Faculty of Medicine, The Chinese University of Hong Kong, Hong Kong SAR, China;4. Department of Surgery, Pamela YoudeNethersole Eastern Hospital, Hong Kong SAR, China;1. Bar-Ilan University, Israel;2. McGill University, Canada;1. Institut of Laser and System Technologies (iLAS), Hamburg University of Technology (TUHH), Am Schleusengraben. 14, 21029 Hamburg, Germany;2. System Technologies and Engineering Design Methodology, Hamburg University of Technology (TUHH), Denickestr. 17, 21073 Hamburg, Germany |
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| Abstract: | The Federal Reserve is always called an independent agency. The term “independent” is rarely defined. The only attempt in the literature and internal records is based on Chairman Martin’s statement that “the Federal Reserve is independent with the government, not independent of the government.” Martin explained several times that independence within government meant that the Federal Reserve helped to finance government budget because they were approved by Congress and signed by the president. Financing budget deficits is the very opposite of the principle adopted when Congress approved the Federal Reserve Act in 1913. In fact, the Federal Reserve has supported Treasury operations many times. I conclude that it is far more important to have an enforceable policy rule such as the Taylor rule, but any rule must have a provision that permits the rule to be set aside. |
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| Keywords: | Independence Lender-of-last-resort Monetary rule |
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