Accentuate The Positive

Challenges for Monetary Policy Part 8 of 14

Writing in last Sundays New York Times, Ben Stein Simple Currency Forex Trading noted this and that the Fed does not have much power to influence the price of oil. He is right. And for that matter, we cant do much about the external demand impacting the price of foodwhich, by the way, carries twice the weight of energy in the consumer basket of personal consumption expenditures. But the dynamics of production and demand among the new participants in the global economy nonetheless impact us in different ways at different times. As these new participants joined the global economy, they provided significant tailwinds, helping us grow by providing cost savings, new sources of productivity enhancement and new sources of demand, helping fatten both the top line and bottom line of our businesses while also holding down inflation. Under such conditions, the Fed could operate with a more accommodative monetary policy than what might have been appropriate in a closed economy, without putting upward pressure on inflation. And that is what the Fed did, although some arguewith the benefit of hindsightit did so for too long.

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