There's nothing the people love more than a Federal Reserve joke.
If somebody had said to me in June or July of 1987, 'We'd like you to become chairman of the Federal Reserve, but you're never allowed to discuss any economics after you leave,' I'd have said, 'Forget it.' What do they want me to do? Become an anthropologist?'
The greatest economic power might in fact remain in the hands of the Federal Reserve. Economists credit the Fed's policy of keeping interest rates at historic lows with helping to pump up the economy and bring unemployment down.
The best thing I have are 5 percent bonds from 1780, denominated from $1 to $20. As far as I can tell, they are obligations from the United States of America, so I should be able to walk down to the Federal Reserve and redeem the uncanceled ones. With 217 years of accrued interest, for a $20 bond, that's about $800,000.
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.
The failure of Lehman Brothers demonstrated that liquidity provision by the Federal Reserve would not be sufficient to stop the crisis; substantial fiscal resources were necessary.
If the fiscal cliff occurs, I don't think the Federal Reserve has the tools to offset that event.
To minimize market uncertainty and achieve the maximum effect of its policies, the Federal Reserve is committed to providing the public as much information as possible about the uses of its balance sheet, plans regarding future uses of its balance sheet, and the criteria on which the relevant decisions are based.
In 2005, attorneys general of 35 states urged the Federal Reserve to end the unsigned check system.
Paul Volcker is a tremendous hero with the Federal Reserve system and for the American economy. He took very tough actions and helped to break the back of double-digit inflation at a time when it had to be done.
