Main Menu

I have known about a law against recessions (which was passed by Congress in 1978) since the summer of 2001. 

When the Fed was fighting as hard as it was in early 2001 to prevent the stock market downturn from turning into an economic downturn - an interest rate cut about every month for several months, which was unprecedented, starting at the beginning of 2001 - I eventually, in the summer, investigated why, using the internet.

(Fighting a completed exponential, which is what the Fed was trying to do because that is what the stock market had turned into by the end of the 1990's, is quite an undertaking!)

I signed up for Fed e-mails - and soon after received a reference to the semi-annual report to Congress, formerly known as the Humphrey-Hawkins testimony, as noted on the report. 

When I did a search to find out why the testimony was "formerly" known as the Humphrey-Hawkins testimony, I very quickly found my answer. 

Congress passed a law in 1978 (I suspect in reaction to the recession of the earlier 1970's), called Humphrey-Hawkins, requiring full employment at low inflation and tasking the Federal Reserve with making that happen. 

It was not enforced right away because consumer price inflation took off right about the time it was passed (in 1978) and at that point, there was a choice between high inflation and high unemployment. 

High unemployment was chosen to get rid of the inflation first. 

The law was first enforced in the wake of the stock market crash of 1987 - and that is why the stock market eventually went exponential at the end of the 1990's and into the year 2000. 

The law expired in the year 2000 - interestingly enough - but the people in the system at that time decided they liked the results of the enforcement of the law 
up to that time so much that they decided to continue to enforce it as if it had never expired, and that is what they have done (I know this because my investigations at the time brought out online texts from the Fed that revealed that).  


And that explained why the Fed chairman was still doing semi-annual testimony to Congress in 2001, when I found out about the law (and is also still doing it in current times), just that the name of the testimony was changed because the law was no longer in effect. 

In fact, as far as I can tell, that is the only thing they changed about what they were doing (to reflect the expiration of the law).  They left everything else in place.