UPDATE: Philly Fed President Charles Plosser says if the Fed had followed his advice, not the Greenspan-Bernanke cheap-money line, we might not be in this mess now. From his Cato Institute speech yesterday:
Fed policy during the mid-2000s “went off track... The Fed kept interest rates too low for too long from 2003 to 2005...
"I stood in this very room in 2003 and 2004, expressing concerns that the fears of deflation were excessive and that policy was probably too accommodative (rates were too low)...
"Even in the wake of the financial crisis, I continue to advocate that the Fed follow a systematic approach that keeps monetary policy focused squarely on inflation...
"We need to ensure that regulations and institutional structures are designed to enhance market discipline in ways that keep risk-taking under control. (BUT:) Monetary policy should retain its focus on providing price stability as a means to support sustainable growth in employment and output over the long run, and not chasing incipient bubbles." Read Plosser's speech here
EARLIER: Congress long ago gave the Federal Reserve, the nation's central bank, two missions: fight price inflation, and keep Americans working. Conservative economists think that's one mission too many.
Monetarists such as Charles Plosser, chosen as president of the Federal Reserve Bank of Philadelphia by the small-town bankers, factory managers, and nonprofit agency bosses who sit on its board, say the Fed hasn't been effective when it tries to fight unemployment with cheap money.
Plosser and his allies argue that the most the Fed can expect to accomplish, over time, is to help control bond yields and price levels by influencing interest rates. When prices are stable, the economy grows steadily and jobs appear, they say.
The Republicans elected to Congress for the first time this month include some Fed critics, such as Sen.-elect Rand Paul (R., Ky.), who broadly oppose Fed chairman Ben Bernanke's fix-it policies and the Fed's independence.
Plosser has been a persistent but respectful critic of Fed intervention. He will rotate onto the Fed's top board as a voting member early next year.
With criticism of the Fed growing, is Plosser preparing to raise his profile as a Bernanke critic? He's planning a speech Thursday afternoon at the libertarian Cato Institute in Washington, titled "Bubble, Bubble, Toil and Trouble: A Dangerous Brew for Monetary Policy." More in my column in today's Inquirer here.