squashed:

In their continuing effor to stay classy, some prominent Republicans want to strike the “maximize U.S. employment” half of the Federal Reserve’s dual mandate. It seems a bit strange to go on the record with that sort of thing during an unemployment crisis … but apparently the Republicans won their elections so now they can let their true colors show.

Worse, I hear they don’t want the Fed to adopt a policy of using puppy birth rates to determine interest rates. Republicans obviously don’t like puppies.

The link between interest rates and unemployment is extremely weak. There does exist a strong correlation, but it indicates that employment currently drives policy, not that policy helps employment. Falling rates are correlated with rising unemployment and rising rates are correlated with falling unemployment.

Note that most other central banks do not have a dual mandate. Australia’s central bank, for example, only has a price mandate.

So, when there is little evidence that a central bank can help employment and a lot of evidence that having employment influence policy leads to devastating economic bubbles, the republicans are the bad guys for making our central bank policies more like everyone else’s?