mauldineconomics.com / By JOHN MAULDIN / NOVEMBER 20, 2013
This week’s Outside the Box is unusual, even for a letter that is noted for its unusual offerings. It is a speech from last week by Charles I. Plosser, President of the Federal Reserve Bank of Philadelphia at (surprisingly to me) the Cato Institute’s 31st Annual Monetary Conference, Washington, DC.
I suppose that if Dallas Fed President Richard Fisher had delivered this speech I would not be terribly surprised. I suspect there are some other Federal Reserve officials here and there whoare in sympathy with this view Plosser presents here, but for quite some time no serious Fed official has outlined the need for a limited Federal Reserve in the way Plosser does today. He essentially proposes four limits on the US Federal Reserve:
- First, limit the Fed’s monetary policy goals to a narrow mandate in which price stability is the sole, or at least the primary, objective;
- Second, limit the types of assets that the Fed can hold on its balance sheet toTreasury securities;
- Third, limit the Fed’s discretion in monetary policymaking by requiring a systematic, rule-like approach;
- And fourth, limit the boundaries of its lender-of-last-resort credit extension.