From The Heritage Foundation:
Monetary Policy/Financial Regulation
Elastic Currency, With a Vengeance
by Alex J. Pollock
American Enterprise Institute
November 29, 2011
The Federal Reserve has become a huge holder of mortgage-related securities. This has tightened the relationship of the American central bank and the rest of the government by creating a remarkable triangle. This government triangle is composed of: 1) The Federal Reserve; 2) The government mortgage companies Fannie Mae and Freddie Mac; and 3) The U.S. Treasury Department. What are we to make of this triangle? It’s certainly providing elastic currency with a vengeance, intertwined with real estate prices, and adding a new element—government mortgage companies—to Treasury and Federal Reserve interdependence. It does not appear that we have the ability to know how this will all turn out.
URL: www.american.com/archive/2011/november/elastic-currency-with-a-vengeance
Monetary Policy/Financial Regulation
Elastic Currency, With a Vengeance
by Alex J. Pollock
American Enterprise Institute
November 29, 2011
The Federal Reserve has become a huge holder of mortgage-related securities. This has tightened the relationship of the American central bank and the rest of the government by creating a remarkable triangle. This government triangle is composed of: 1) The Federal Reserve; 2) The government mortgage companies Fannie Mae and Freddie Mac; and 3) The U.S. Treasury Department. What are we to make of this triangle? It’s certainly providing elastic currency with a vengeance, intertwined with real estate prices, and adding a new element—government mortgage companies—to Treasury and Federal Reserve interdependence. It does not appear that we have the ability to know how this will all turn out.
URL: www.american.com/archive/2011/november/elastic-currency-with-a-vengeance
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