Saturday, July 5, 2008

Poole admits Fed inflates

It's not often one sees an open admission of wrong-doing from one of the wrong-doers, but former St Louis Fed president, William Poole, has done precisely that during an interview in a German newspaper. Jörg Guido Hülsmann provided an English translation of Poole's statements on the Mises blog, along with commentary. Poole said:
In historical perspective inflation is a means to diminish the stress felt by debtors. The policy of the US central bank is construed to create inflation to alleviate that stress. Its monetary policy was, is, and will be "lax" until the economic situation, and the situation of financial firms, will be improved. All in all this will entail an inflationary tendency, even if the latter will entail a bundle of new problems in another three or four more years.
Poole here confirms the Austrian interpretation of what central banking is all about: special-interest policy in the short run, with harmful aggregate consequences in the medium and long run. Significantly, Poole made this statement only after he had left the Fed (he quit in March).

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