The Fed Cannot Create Economic Growth
John Tamny RealClearMarkets
As the year 1970 drew to a close, some of President Richard Nixon’s top economic advisors were frantically searching for ways to grow the economy ahead of the ’72 elections. Herbert Stein served Nixon as head of the Council of Economic Advisors, and he was of the view that “full employment” of 4.5% and gross national product growth of 9% ($1.065 billion) could be achieved if the Federal Reserve oversaw money growth of 8%.
Channeling our Washington minders of today who feel that any economic “crisis” necessitates a muscular governmental response, Stein suggested that “the situation is serious and getting more serious every day.” Stein didn’t get his wish of 8% growth, but a study soon to be released by the Office of Management and Budget (OMB) would largely bolster his argument.