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Thursday, February 4, 2010

Another Optimist

In this morning's Wall Street Journal, Andy Kessler writes that there may be a way for the Federal Reserve to exit the current monetary expansion without killing the economic recovery. Not only that, he thinks his plan could avoid rapid inflation and make bank panics a thing of the past. His idea is to have the Fed increase the amount of reserves that banks are required to hold, thereby reducing the amount of leverage in the banking system and giving the fed more control over money supply.

I hope Andy is on to something and that Bernanke is thinking along the same lines. A more stable banking system would certainly help all of us, and I am all in favor of solutions that require less regulation and bureaucracy.