Last weeks Friday Funnies covered some of the key functions that the Fed performs. This week’s comic looks at the balancing act that the Federal Reserve performs.
While some recessions might result from monetary policy of the Fed, our current recession is mainly the result of the impacts of the COVID-19 global pandemic shock to labor productivity and consumer demand. The Fed is currently concerned that fiscal policy might be needed to inject more money into the economy since the Fed has already exhausted most of its ability to increase credit growth. Fiscal policy (spending by the House and Senate appropriations) can help boost demand for goods and services in the economy by building infrastructure and providing cash to individuals and businesses that have either slowed down or stopped working all together.
Next week we’ll cover the negative impacts of inflation. Since it has been so long since we’ve had high inflation in the United States, it is an important lesson to cover based on our historical experience.