Some Federal Reserve Board Members Expressing Concern on Easy-Money Policies

Feb. 22, 2013

Some Federal Reserve Board members are growing uneasy over the central bank’s easy-money policies, commonly known as Quantitative Easing.

Alan Beaulieu Blog

The minutes from the Federal Reserve Board January 29-30 meeting show that some of the board members are growing uneasy over the central bank’s easy-money policies, commonly known as Quantitative Easing. The concern is not universal, nor is the reason for the concern the same among the concerned.

As you most likely know, the Fed has been pumping $85 billion a month into the economy, and they have stated that this will continue until the job market improves “substantially.” There is now some concern that they may have to alter that view.

Kansas City Fed President Esther George is concerned that the current course of action will lead to financial instability caused by easy-money policies that will allow financial institutions to take on too much risk. Personally, I would have added the word “again” if I had made that statement.

Ms. George is correct to assume that easy money can easily lead to another credit bubble and too much risk-taking in financial institutions. Others, named in the meeting minutes, are also right in that a continuous fire hose of easy money will not quickly bring down unemployment or raise employment substantially. In combination, they are right that the Fed should gradually scale back their operations before longer-term problems are created or made worse.

It is reassuring to know that there are reasoned voices on the Board. But it is also good for us all to remember that these are not omniscient beings. History shows that the Fed has not kept the economy from overheating, nor have they been successful in keeping the US out of recessions over the last nine decades. A faith that they will make everything ok is an abandonment of responsibility by business leaders.

Utilize our high accuracy rate and plan your business around credible forecasts, not on what the Fed may or may not do because, as the minutes show, even they are not sure what they should do next. Business leaders do not have that luxury. We must communicate clear actionable plans throughout the organization. The plans cannot be made on the basis of a vague Federal Reserve Board plan.

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends.

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.