I listened to the debate today on Bloomberg between Ron Paul and Paul Krugman.
Here's the deal.Excess Reserves Then and Now
1. The Fed can control money supply but it will have no control over interest rates (or anything else).
2. The Fed can control short-term interest rates, but then it would have no control over money supply (or anything else).
That is the full and complete extent of the Fed's "control". Note that neither price stability nor unemployment is in either equation. The reason is the Fed controls neither.
The result of all the recent Fed printing is a big yawn, otherwise known as excessive reserves as the following chart shows.
Excess Reserves of Depository Institutions
Does that chart look like the Fed is in control? If so, control of what?
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