The Federal Reserve on Monday proposed allowing banks to set up the equivalent of certificates of deposit at the central bank, a move that would help the Fed mop up money pumped into the economy and prevent inflation from taking off later.Not a good sign. On the other hand, at least Summers has Fannie and Freddie continuing to pump mo' money into the economy...
Under the proposal, the Fed would offer "term deposits" that would pay interest. Doing so would provide banks with another incentive to park their money at the Fed, rather than having it flow back into the economy.
The proposal comes as no surprise. Federal Reserve Chairman Ben S. Bernanke and other Fed officials have repeatedly said the creation of "term deposits" -- essentially the equivalent of CDs for banks -- would be one of several tools the Fed could use to drain money from the economy when the time is right.
Thursday, December 31, 2009
What's the Fed Thinking?
Via Ryan Avent, here is Ezra Klein.
Posted by Thorstein Veblen at 3:50 PM