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The Fed needs to get with the times

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Today's Agenda

Fed's Mandate Makes No Sense Now

A lot has changed since 1977: cars, music, pants … pretty much everything, and not always for the best. What has not changed is the job description of the U.S. central bank, and that is definitely not for the best.

Way back when the Carter administration was still in short pants, Congress told the Federal Reserve to focus on maximizing employment and keeping prices "stable." We call this the Fed's "dual mandate," and it suited the era of skyrocketing unemployment and inflation in which it was born. But it has made less sense in recent years, when unemployment and inflation have been low and interest rates have dived toward zero. The dual mandate is now only slightly more sensible than wearing bell-bottoms to work (assuming you still "go" to "work").

The Fed has lately been thinking deep thoughts about monetary policy, and this week Chairman Jerome Powell is expected to deliver the results of those thoughts. One thing he should suggest, Bloomberg's editorial board writes, is that the Fed finally shed its outdated dual mandate and instead target economic growth. This would avoid many of the quagmires in which the Fed now finds itself, particularly the one where it can't ever seem to get inflation to match its target.

And what is inflation in a pandemic, anyway? Supply shortages and sudden dips in quality have rendered traditional price metrics useless, writes Tyler Cowen. That only makes the Fed's current focus on inflation more difficult.

Whatever the central bank's mandate, its response for now, in the middle of a pandemic and recession, will involve sitting on interest rates. One somewhat radical approach to this is something called "yield curve control," which involves announcing what it wants a certain long-term rate to be and bullying the market to make it so. It's a tool last used in the 1940s, to help keep rates low so the U.S. didn't drown in its war debt. It worked well enough for a while, Noah Smith writes, but using it too long resulted in runaway inflation and other problems. You've got to know when to change with the times. That goes for both pants and monetary policy tools.

Lessons in Covid Management

The pandemic is another example of the need for policy flexibility, only on a much faster and deadlier scale. For example, governments around the world are throwing everything at a race for a coronavirus vaccine. While they wait for that to happen, though, they must scramble to find the right balance of mask-wearing and distancing to keep people safe without shutting down economies. A few knockout Covid-19 treatments would render all these concerns moot, writes Lionel Laurent, by neutralizing the disease even without a vaccine. And yet we don't have too many moonshot-type programs to develop those, even though they're cheaper and easier to make and administer than vaccines.

Meanwhile, the pandemic-management balancing act has had produced mixed results at best. One common pattern, though, is that countries run by women have generally done a much better job handling the disease than countries run by men, writes Andreas Kluth. This may be luck, or it may be that women are better at managing risk and being flexible and empathetic, as studies have shown. In any event, you'd have been far better off this year in, say, New Zealand than in the U.K.:

Bonus Virus-Management Reading: Holy season in Israel is a challenge for public-health officials this year. — Zev Chafets

RNC Down the Hatch (Act)

The theme of Tuesday night at the Republican National Convention was apparently, "Is This Breaking the Law? What About This? How About Now?" President Donald Trump and members of his administration mingled government business and campaigning so much they might as well have just beaten the Hatch Act on stage like a piñata, notes Jonathan Bernstein. It was just the central example of a night filled with norm-breaking.

But any tactic is rationalized in the minds of Trumpists by their own bottomless sense of victimization, writes Francis Wilkinson. Their mistakes and misdeeds bring condemnation from the news media and Democrats, which only makes their big grievance bonfire burn higher. So everything, up to maybe even shooting protesters in the street, eventually becomes justified.

The other norm Trump has trashed lately is the one about how the president reassures everybody of the integrity of elections. Instead, he has repeatedly warned that Democrats will steal the election, possibly by hijacking mail-in voting. This is nonsense and likely to depress turnout during a pandemic. But it wouldn't be a worry if the whole nation simply adopted drop-box voting, as several states already have, write James Zirin and Matthew Mallow. It's proved to be secure and fair and lets people not worry about mail delays or coronavirus.

Telltale Charts

Although admirably intended, New Jersey's baby-bond plan falls far short, writes Brian Chappatta, both for the state's finances and for babies.

Now that European bank borrowing costs have stabilized, letting them pay dividends again could help their lagging stock prices rise too, writes Marcus Ashworth.

Further Reading

Trump's Iran nuclear-deal gambit will only make it easier for Joe Biden to revive it. — John Bolton

China can't seem to put a lid on its food-waste problem. — Adam Minter

Fortnite maker Epic has a point about the Apple App Store's unfair dominance, but it can make it without hurting itself and developers in the process. — Tae Kim

Libya may soon see a peaceful end to its civil war. — Bobby Ghosh

New alcohol guidelines are just suggestions, and the health effects of light drinking are still unclear. — Faye Flam

So you want to buy a house? Here are the steps you'll need to take first. — Anora Gaudiano


"Unsurvivable" Hurricane Laura could be the worst storm to hit Louisiana in 160 years.

What is going on with Kim Jong Un?

How the Sacklers shifted $10.8 billion of their opioid fortune.


Paleontologist runs on a Scottish beach, finds an unexpected dinosaur bone.

Massachusetts man is on a quest to have an island officially called Busta Rhymes Island. (h/t Scott Kominers for the first two kickers)

Jacques Cousteau's grandson wants to build the ISS of the sea.

How to not fear death.

Note: Please send dinosaur bones and complaints to Mark Gongloff at

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