Jim Cramer's Mad Money is one of the most popular shows
on CNBC, a cable TV network that specializes in business
and financial news. Cramer, who mostly offers investment
advice, is known for his sense of showmanship. But few
viewers were prepared for his outburst on August 3, 2007,
when he began screaming about what he saw as inadequate
action from the Federal Reserve:
"Bernanke is being an academic! It is no time to be an
academic. . . . He has no idea how bad it is out there.
He has no idea! He has no idea! . . . and Bill Poole? Has
no idea what it's like out there! . . . They're nuts! They
know nothing! . . . The Fed is asleep! Bill Poole is a
shame! He's shameful!!"
Who are Bernanke and Bill
Poole? In the previous chapter we
described the role of the Federal Reserve System, the U.S. central bank.
At the time of Cramer's tirade, Ben
Bernanke, a former Princeton professor of economics, was the chair
of the Fed's Board of Governors,
and William Poole, also a former
economics professor, was the president of the Federal Reserve Bank of
St. Louis. Both men, because of
their positions, are members of the
Federal Open Market Committee,
which meets eight times a year to
set monetary policy. In August
2007, Cramerwas crying outforthe
Fed to change monetary policy in
order to address what he perceived
to be a growing financial crisis.
Why was Cramer screaming at the Federal Reserve
rather than, say, the U.S. Treasury-or, for that matter, the
president? The answer is that the Fed's control of monetary policy makes it the first line of response to macroeconomic difficulties-very much including the financial crisis
that had Cramer so upset. Indeed, within a few weeks the
Fed swung into action with a dramatic reversal of its previous policies.
In Section 4, we developed the aggregate demand
and supply model and introduced the use of fiscal policy
to stabilize the economy. In Section 5, we introduced
money, banking, and the Federal Reserve System, and
began to look at how monetary
policy is used to stabilize the
economy. In this section, we
use the models introduced in
Sections 4 and 5 to further
develop our understanding of
stabilization policies {both fiscal and monetary}, including
their long-run effects on the
economy. In addition, we introduce the Phillips curve-a
short-run trade-off between
unexpected inflation and unemployment-and investigate
the role of expectations in the
economy. We end the section
with a brief summary of the
history of macroeconomic
thought and how the modern
consensus view of stabilization
policy has developed.
on CNBC, a cable TV network that specializes in business
and financial news. Cramer, who mostly offers investment
advice, is known for his sense of showmanship. But few
viewers were prepared for his outburst on August 3, 2007,
when he began screaming about what he saw as inadequate
action from the Federal Reserve:
"Bernanke is being an academic! It is no time to be an
academic. . . . He has no idea how bad it is out there.
He has no idea! He has no idea! . . . and Bill Poole? Has
no idea what it's like out there! . . . They're nuts! They
know nothing! . . . The Fed is asleep! Bill Poole is a
shame! He's shameful!!"
Who are Bernanke and Bill
Poole? In the previous chapter we
described the role of the Federal Reserve System, the U.S. central bank.
At the time of Cramer's tirade, Ben
Bernanke, a former Princeton professor of economics, was the chair
of the Fed's Board of Governors,
and William Poole, also a former
economics professor, was the president of the Federal Reserve Bank of
St. Louis. Both men, because of
their positions, are members of the
Federal Open Market Committee,
which meets eight times a year to
set monetary policy. In August
2007, Cramerwas crying outforthe
Fed to change monetary policy in
order to address what he perceived
to be a growing financial crisis.
Why was Cramer screaming at the Federal Reserve
rather than, say, the U.S. Treasury-or, for that matter, the
president? The answer is that the Fed's control of monetary policy makes it the first line of response to macroeconomic difficulties-very much including the financial crisis
that had Cramer so upset. Indeed, within a few weeks the
Fed swung into action with a dramatic reversal of its previous policies.
In Section 4, we developed the aggregate demand
and supply model and introduced the use of fiscal policy
to stabilize the economy. In Section 5, we introduced
money, banking, and the Federal Reserve System, and
began to look at how monetary
policy is used to stabilize the
economy. In this section, we
use the models introduced in
Sections 4 and 5 to further
develop our understanding of
stabilization policies {both fiscal and monetary}, including
their long-run effects on the
economy. In addition, we introduce the Phillips curve-a
short-run trade-off between
unexpected inflation and unemployment-and investigate
the role of expectations in the
economy. We end the section
with a brief summary of the
history of macroeconomic
thought and how the modern
consensus view of stabilization
policy has developed.
( Margaret Ray )
[ Krugman's Economics for AP* ]
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