My New Paradigm Frog

The highlight of my nearly 14-year tenure as president of the Federal Reserve Bank of Dallas and a member of the FOMC was the “new paradigm” economy in the second half of the 1990s. During that time, I often used the analogy of boiling a frog to illustrate the positive changes in the economy that had taken place so gradually over time that even though they had become quite substantial, they crept over people. The joke in the frog story, of course, was that the Frog didn’t jump out of the boiling water because it heated up so gradually that the Frog didn’t realize that its paradigm was changing.

I thought about it this morning for the first time in a long time because the GDP report coincided with the conclusion of the FOMC meeting. My ” new ” thought was that here we are with a super easy monetary policy several years after the beginning of the economic recovery, while real GDP is growing at a rate of four percent. An emergency monetary policy has lasted long after the emergency in the economy seemed to be over. What bothers me is that I have generally supported monetary policy, sooner rather than later, and maintained it while the unemployment rate has dropped from 10% to 6.1% and the 2% growth economy has temporarily reached at least 4%. Call Me Kermit.

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