Is the Federal Reserve Independent?

Abstract

The power to coin money and regulate the value thereof is constitutionally delegated to Congress, preventing true Federal Reserve independence. This issue of PERCspectives on Policy, by PERC Director Thomas Saving, discusses Federal Reserve independence through the lens of Great Recession and Great War deficits to analyze how the Federal Reserve has historically contributed to Treasury financing of fiscal deficits. At first glance it seems that the Federal Reserve was a partner to the Treasury by financing more than half of the Recession debt in recent years. However, the lack of inflation that would be expected is a result of the Federal Reserve sterilizing much of its asset expansion by paying interest on excess reserves.