Commentary

Letter to the Editor: Fed Omitted Most Important Price

Dear Sir:

Willem Buiter (“The Fed’s bad manners risk offending foreigners”, Comment, February 5) hits the nail on the head — almost. Yes, the Fed, under the chairmanship of Prof Ben Bernanke, operated as if it were “the central bank of a closed economy”. The absurdities that this led to go further than those articulated by Dr Buiter, however.

For example, the six metrics on Prof Bernanke’s Dashboard (see In Fed We Trust, by David Wessel, p271) did not include the USD/EUR exchange rate — arguably the world’s most important price.

Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C.