Question

What reasons are given by those who claim the Federal Reserve has outlived its usefulness, and do you agree or disagree with those reasons? Justify your position.

Answer 1

There are following reasons:
1.   Monetary policy often leads to the liquidity trap and it is the fiscal policy that is more prominent towards the economic development. So, the Federal Reserve has lived its life and is less useful now.
2.   Policy adopted by the Federal Reserve leads to the contradiction among its different objectives.
3.   Monetary approach is less successful, rather other economic approach should be given the opportunity to apply and improve the economy.
4.   Banking and financial system are being deregulated, making Federal Reserve to be obsolete and less required.
5.   Federal Reserve is reactive in nature, rather proactive to prevent the economic crisis such as the crisis of 2007-08.

Though there are issues with the end results achieved by the Federal Reserve, but I disagree that the Federal Reserve has outlived its usefulness. The most important objective the Federal Reserve has achieved, is the bringing back the confidence of investors and consumers into the banking system and making all the banks in the country to follow the same direction w.r.t. the policy, objectives and governance. The Federal Reserve faces the problem of timing (the inside and outside lag effect), but it is with the every system across the world and it is very difficult to predict the right time to implement the policy. Further, the Federal Reserve helps to complement the fiscal policy implemented by the government.
It is also true that there are deregulations, but a Federal Reserve is required to prevent the speculation and moral hazard in the banking sector, thus protecting the interests of the consumers. One blame is also made that the US dollar is depreciating, but it is not the case as it is relative in nature. Over a period of time, other economies in the world, grew and value of their currencies appreciated lately. It led to the decrease in the value of US dollar w.r.t. the other major foreign currencies. For this result, the Federal Reserve cannot be blamed.
In the recent crisis of 2007-08, it is the Federal Reserve that worked relentlessly in combination with the fiscal policy to improve the economic scenario. It led to the decrease in the unemployment level up to 4.1% and inflation up to 2% as of November, 2017 review by Fed. It shows that the Federal Reserve is still very significant in the USA economy.