Thus, the Federal Reserve’s monetary policy objectives are closely aligned with those of minimizing systemic risk. To the extent that the proposed new regulatory framework would contribute to greater financial stability, it should improve the ability of monetary policy to achieve maximum employment and stable prices.
That there is uncertainty about how the global economy will respond to an unprecedented period of deleveraging is not surprising. More troubling is the apparent uncertainty about the stance and perceived effectiveness of economic policy. The question is what can policy-makers do about it? Europe Let me start with Europe.