Biting the Fed’s Hand

How is the Fed doing?

In the idyllic setting of Jackson Hole, central bankers meet, greet, and eat. Between schmoozing, they listen to papers and presentations. This last week a London School economist gave Obi-Wan Bernanke and Don Kohn a serious dressing down.

Willem Buiter presented a 144-page paper, 143 pages of which were devoted to slamming the central bank for its handling of the past year’s financial crisis. He says the Fed overreacted to what is essentially a Wall Street problem and is now risking its long-term credibility for short-term financial stability. Many of his points are well considered.

It’s good to note that only a truly healthy institution can listen to deep criticism of its core assumptions. Buiter’s critique just proves the point that our economic system is adaptive and self-correcting. His sound criticism gives room for broad optimism.

Douglas R. Tengdin, CFA
Chief Investment Officer
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