Summary of The Article
The article, which was electronically published by The New York Times, emphasizes on 1) economic growth and 2) monetary policy. The article asserts that there is a consensus among the economists that ramifications, of the 2007 economic recession, are mitigated to the extent that they do not seriously/adversely affect the economy; however, there is a difference of opinion regarding the changes that have been suggested for existing monetary policy. According to the Federal Reserve (central financial institution of the United States that determines monetary policy), the American economy is on an upswing, which may cause inflation in the economy. To keep inflation rate healthy (around 3.5%), it is essential to adopt/implement contractionary monetary policy. This monetary policy will not only reduce the supply of money in the American economy, but also it will readjust interest rates, which were quite low since the start of the Great Recession. Economists, who disagree with these assertions, are of the view that expansionary monetary policy has not realized all its objectives, as nominal/real wages are still low. Also, changes in interest rates will affect the size of investment in the economy, which will affect economic growth. In the article, the Federal Reserve admits that its expansionary monetary policy has not realized all the identified objectives (Tankersley).
Connection with Economic Subject
The article, by Jim Tankersley, primarily focuses on economic growth and it explains how the Federal Reserve uses various kinds of monetary policies to achieve various kinds of objectives. For instance, during the recession, Federal Reserve employed expansionary monetary policy, which aimed to increase the size of the investment, the rate of inflation and level of employment in the economy. The scheme, of the Federal Reserve, was to lower the interest rate and increase the money supply to stimulate economy aggressively (economic stimulus). The expansionary monetary policy increased level of investment, employment (consumption) and inflation in the American economy. However, Federal Reserve fears that if the economy continues to grow at this pace, it will yield unintentional consequences (high inflation rate). The increase in the inflation will reduce the purchasing power and real wages (people will be buying less than previously), which will affect consumption that is the engine of economic growth. Economic growth is a primary concern of a government and central bank, as it keeps the unemployment at its natural rate. However, it is quite apparent from the study published in the article that change in monetary policy may affect economic growth adversely. It may occur because contractionary monetary policy will readjust the interest rates (at a high level than the current) and swelling of interest rates will reduce the size of investment in the economy.
One Strength and One Weakness of The Article
The article, Fed Officials Worry the Economy Is Too Good Workers Still Feel Left Behind, is very balanced and comprehensive. It has provided various views on suggested an alteration in current monetary policy. For instance, we learn why the Federal Reserve intends to alter existing monetary policy and what will be the consequences of it. The article focuses on the major political-economic issue (economic growth) and discusses what are various prevailing perspectives regarding the growth of the American economy. It provides information regarding nominal wages, employment level, and inflation rate. We learn about various targets, which Federal Reserve had set and we learn that the Federal Reserve’s concern is an overall economy (not few sectors of the economy). The article fails to mention and explain the role of the Federal Reserve in creating the Great Recession. Federal Reserve, with all its resources, not only failed to project a major economic crisis, but it also failed to manage it effectively. Once again, the Federal Reserve is taking decisions in haste, which may have various kinds of implications for the United States’ economy as the investment has a direct correlation with employment and economic growth, which is why the decision to change monetary policy is very controversial.
Work Cited
Tankersley, Jim. “Fed Officials Worry the Economy Is Too Good. Workers Still Feel Left Behind” The New York Times. The New York Times, 26 April 2018. Web. 3 May 2018. https://www.nytimes.com/2018/04/26/us/politics/fed-economy-overheating.html.
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