Despite its enormous responsibility for the state of the economy, the Federal Reserve’s performance is difficult to assess. One problem is that by statute the Fed is to pursue three separate goals: moderate long-term interest rates, maximum employment, and stable prices. These three objectives tend to come into conflict. At present, for example, the Federal funds rate is approaching 0.1 percent, unemployment is at its highest level in decades, and the price level is in decline. Out of concern for unemployment, however, the Fed is unwilling to raise interest rates At the same time, it is creating a serious threat of future inflation.

The current issue of AIER’s Research Reports leads off with Allan Meltzer’s critique of the Obama administration’s proposals for giving the Federal Reserve System a new role in bank regulation. The article reprints testimony Professor Meltzer gave July 9, 2009, before the Subcommittee on Monetary Policy of the House Committee on Financial Services.

After months of no positive movement, 11 out of AIER's 12 primary leading indicators have posted increases in the most recent batch of data. However, the big picture does not yet point to a definite change in the business cycle. For most of the series, the upturn has lasted for only a month or two, and the statistical probabilities do not yet point to long-term changes.

With the recession hammering local governments, a growing number are eyeing bankruptcy as an option. Municipal bankruptcy rose out of the Great Depression when the sinking economy took with it many state and local governments. Unable to pay their debts, local governments lobbied for federal legislation allowing them to file for bankruptcy. The result was Chapter 9 bankruptcy, and in the past 70 years, nearly 600 local entities have filed under Chapter 9. That may seem like a lot, but it’s far lower than the roughly 24,000 of annual business bankruptcy filings in recent years. Not every state allows this option, but currently, more than half of U.S. states do.

If anything, the current recession has put money in the pockets of gold dealers.