Tuesday, June 12, 2012

Job Creation Is The Fed's Job

I don't know who exactly it was who introduced the term "job creator" into our political lexicon, but the idea that CEOs fit that description was always silly.  The CEO's fiduciary responsibility is to maximize shareholder value.  If the way to do that is by firing everybody, selling the assets, and sending the money to shareholders as a big dividend check, that's what the CEO's job description tells him to do.

Whose responsibility is it to create jobs? The Chairman of the Federal Reserve. That's half of the Fed's dual mandate -- the other half is to prevent runaway inflation.  And the Fed has the tools to do so, in its ability to set interest rates, buy trillions of dollars of bonds, and communicate long-term plans about those actions if it so pleases.  So if you're in an economy where there's massive unemployment and very little inflation, as you are, the Federal Reserve is to blame.  (Or if you're in Europe, it's the European Central Bank.)  There's also plenty of room to blame fiscal policymakers like Senators and the President, but no one person has as much power over job creation as the Fed chair.  
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