What makes the current situation all the more challenging is the enormity of the inflation problem. At no point in the past four decades has the Fed’s preferred inflation gauge run so far above its 2 per cent target and unemployment hovered so far below what is considered a sustainable rate...
Moreover, the adoption of government deposit insurance after the Great Depression as well as banks’ access to the discount window of the central bank may augment the moral hazard induced by deposit insurance and a lender of last resort, offsetting potential economies of scope associated with ...