Fed Chief Gets Set to Apply Lessons of Japan’s History
Check out the following article from The Wall Street Journal and the accompanying commentary by Economics Finance blog contributor Justin Temple.
Federal Reserve Chief Ben Bernanke’s economic lessons on Japan’s ailing economy in the 1990’s have come full circle and are now lessons that he must consider in an attempt to aid the United States’ economy with slow growth, high unemployment, and declining inflation. In recent months the Fed has planned to exit from easy-money policies, but instead they now want to do more to support growth in the economy. Mr. Bernanke describes a myriad of different possibilities that could ultimately boost the economy. The article describes the differences and, more importantly, the striking similarities between Japan’s economy in the 1990’s and the United States’ today. According to a one-time Bank of Japan member, “Do not put yourself into the position of zero rates.” The U.S. did not heed this advice and interest rates have fallen to nearly zero. The following article discuses possibilities of where to go from here.
What do you think the Fed should do? Provide us with your suggestions in the comments section!