Tuesday, January 17, 2012

How the Fed can prevent the next financial crisis

Mark Thoma in The Fiscal Times wrote an interesting post on how the Fed can prevent the next financial crisis.

What caught my attention was not his conclusion that the Fed could prevent the next financial crisis, but rather what he considered the critical first step.
The first step in the policy process is for policymakers to be aware that there’s a problem in the economy, and access to reliable, timely, and informative data is critical. Unfortunately, there are substantial lags in the availability of data that indicate where the economy is headed, and it can be six months or longer before key variables such as GDP are known. This is a problem that doesn’t get enough attention, and in the information age we ought to be able to do better.
His point about the critical need to have access to reliable, timely, and informative data and that in the information age we ought to be able to provide this data is one your humble blogger has been making since before the beginning of the credit crisis.

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