1. What’s with this “real economy/Main St.” vs. “financial markets/Wall St.” business? Does anyone who has been following these kinds of crises for longer than me know if that’s a new way of framing this or an old one? How do we distinguish the “real” and “fake”* economies anyway? Sociologist and Business Prof. Jerry Davis said at a panel on the financial crisis yesterday that Main St. has become Wall St., as everyday people discuss credit default swaps, LIBOR and the TED spread, etc. I wonder if they were ever separable, and/or what people really mean by that. Perhaps what’s new is that Main St. is becoming aware that it has always been Wall St. as well.
2. According to the Fed’s FAQ, the goal of monetary policy is to promote “sustainable economic growth, full employment, and stable prices.” These three targets of monetary policy are measured by national income statistics, unemployment statistics, and inflation statistics, all of which came into being** after the Fed (which was created in 1913). The original purpose of the Fed, it seems, was to create a publicly run system to prevent and manage banking crises (a role played by JP Morgan in two crises at the end of the 19th and beginning of the 20th century). If Timothy Mitchell (1998, 2002) is correct, the Fed is now tasked with solving problems that literally could not have existed when the system was created. Hm.
* While “Main St.” clearly opposed “Wall St.”, it’s less clear to me what opposes “real economy”. “Fake” is the obvious opposite of real, but that seems to lack nuance and I don’t see it used. Is it the “financial markets” or “financial economy”? Is it just “Wall St.” with no real opposed term to “real economy”? I’m not sure.
** More or less anyway. Some of the ideas are much older, of course, but the first measures that were seen as up to date and reliable came in the 20s and 30s. See, for example, Revolution in U.S. Government Statistics 1926-1976 for details.