We need the Fed to be credible

Author Michael Madowitz argues that the strength of the U.S. economy requires a Federal Reserve that Americans believe all the time, not only when it says it is going to fight inflation.

Our immediate response to the Great Recession was actually quite impressive: our central bank showed ingenuity and boldness, and didn’t underrespond to the recession once it became clear action was required. The federal government took hard, unpopular steps to bail out companies whose otherwise-imminent collapse would have caused major problems for our economy.

The government followed that up by passing a decent stimulus measure and reforming our major short-term problem — an underregulated financial sector — then reforming our major long-term problem, an inefficient and costly health-care sector. In short, it would have been much worse, but our institutions carried the day, at least for a while.

The above excerpt was originally published in MarketWatch. Click here to view the full article.

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