Fed Theoreticians Need Some Real-World Feedback: Caroline Baum
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Nov. 11 (Bloomberg) -- If there’s a fire in the building,exit via the stairwell. If the power goes out, wait for thebackup generator to kick in. If the car engine overheats on thehighway, pull over and call AAA.
These are all contingency plans. Now the Federal Reservewants one of its own. Instead of merely pledging to hold short-term rates near zero or considering additional asset purchases,the Federal Open Market Committee should provide “a publiccontingency plan -- that is, provide clear guidance on how itwill respond to a variety of relevant scenarios,” NarayanaKocherlakota, president of the Minneapolis Fed, said Tuesday ina speech to the South Dakota Chamber of Commerce.