Fed's Poole: Fed Remains Vigilant on Inflation Front
Tuesday, March 30, 2004 6:00:00 PM
--Praises U.S. Entrepreneurial Spirit
WASHINGTON (MktNews) - The Federal Reserve has managed to keep U.S. inflation in check for decades and remains "vigilant" on that front -- helping to create an environment promoting American entrepreneurship, St. Louis Fed President William Poole said Tuesday.
In remarks prepared for the Evansville Rotary Club in Indiana, Poole sang the praises of the entrepreneurial spirit in the United States and said it will continue to be important on the success in this aspect of the economy.
"We are extremely fortunate in the United States that people here have an abundance of entrepreneurial spirit.
"For the most part, the issue we face is that of removing impediments and disincentives. We do a pretty good job with public policies favorable to economic growth. I won't dwell on what we can do better, but improvements are certainly possible," Poole said.
Poole noted that studies show that Americans are "much more willing" to become entrepreneurs than residents of most other countries. And he said lower regulatory barriers are not necessarily the main driver behind this tendency.
Citing Scandinavia as an example, Poole said, those countries are judged by the World Bank to have "among the best institutional arrangements to allow entrepreneurship to thrive," but that a far lower percentage of residents there would prefer to be entrepreneurs.
Poole generally described Americans as much less risk-averse than Europeans.
A good example of this mindset is the late 1970s-early 1980s innovation of the high risk/high yield "junk bond" allowing new firms to raise substantial amounts of capital, Poole said.
Though junk bonds were disparaged after scandals in the 1980s, "they fueled a great deal of investment then and continue to do so today," Poole said.
As for the Fed's role in promoting an atmosphere of entrepreneur- ship, Poole said a key has been maintaining price stability: "Inflation has been kept in check for more than two decades, and you can rest assured that the Fed remains vigilant on that front."
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