BRIAN KANTOR: From boom to avoiding bust. A playbook for the Fed
Keeping an eye on the money supply is key to steering a middle road
The financial markets have been roiled by the prospect of recession in the US. Market makers fear the Fed, having allowed prices to explode in the US, will now reverse course abruptly enough to bust the economy. They are right to worry.
Managing the level of demand in an economy well enough to exercise its full potential and avoid continuous increases in price levels — inflation or its opposite, deflation — is a central bank ideal. The more stable the environment, the more accurate become the plans of business, the more predictable their earnings and their values — and vice versa...