Moneybox: Can This Man Save the American Economy?

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Moneybox Can This Man Save the American Economy? Chicago Federal Reserve President Charles Evans has an ingenious plan to jump-start job creation. His Fed colleagues should listen to him. By Matthew Yglesias Posted Monday, Mar 26, 2012, at 03:54 PM ET Can talking differently boost the economy? It sounds like a silly idea, but as long as the talkers have the right jobs, there's considerable theoretical reason to believe they can make a huge difference. New research from the Federal Reserve Bank of Chicago shows that talk does matter and that the Fed could significantly improve the economy by choosing its words better. The messenger for all this was Charles Evans, the president of the Chicago Fed, who is waging a low-profile war to revive the economy by changing how the Fed speaks. Last week, at the annual Brookings Papers on Economic Activity conference, Evans tried to make this case to an elite audience of economists and policymakers. His paper, "Macroeconomic Effects of FOMC Forward Guidance," co-written with Chicago Fed staffers, is one of the most important policy arguments out there today, arguing that the central bank could significantly stimulate the economy simply by rephrasing its statement that "economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels of the federal funds rate through late 2014." When faced with a recession and high unemployment, advanced economies ask the central bank to cut interest rates. Lower rates spur interest-sensitive purchases, primarily in vehicles for both consumer and business-investment purposes, and in physical structures like housing, offices, warehouses, and storefronts. This helps reduce unemployment in highly cyclical sectors and helps stabilize the economy by bolstering incomes. Conversely ... To continue reading, click here. Join the Fray: our reader discussion forum What did you think of this article? POST A MESSAGE | READ MESSAGES Also In Slate The Crazy Arizona Bill That Would Let Employers Discriminate Against Women for Taking Birth Control The Weirdest Book Ever Written About the Civil War What Happened When the French Made a Movie About the American Teen "Pregnancy Pact"	Advertisement
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