January 10, 2025 • 43 mins
Jon Hartley and David Beckworth discuss David’s career, monetary policy, the history of Nominal GDP targeting as an idea along with its benefits and challenges, the history of inflation targeting along with its recent evolution, the Fed’s recent framework reviews, as well as corridor (scarce reserves) versus floor (ample reserves) systems.
Recorded on January 7, 2025.
ABOUT THE SPEAKERS:
David Beckworth is a senior research fellow at the Mercatus Center at George Mason University and director of the Mercatus Center’s monetary policy program. His primary research focuses on the targets, tools, operating system, and governance of the Federal Reserve, and has included work on the US Treasury market, the safe asset shortage, and dollar dominance. He has advised congressional staffers and Fed officials on monetary policy and has been cited by the Wall Street Journal, Financial Times, New York Times, Bloomberg Businessweek, and the Economist.
Beckworth is also the host of Macro Musings, a weekly podcast on macroeconomics, where, since 2016, he has interviewed hundreds of experts, including regional presidents of the Federal Reserve, Nobel laureates, and leading academics from around the world. He is the author of Boom and Bust Banking: The Causes and Cures of the Great Recession (Independent Institute, 2012). Formerly an international economist at the US Department of the Treasury, he earned his PhD in economics from the University of Georgia.
Follow David Beckworth on X: DavidBeckworth
Jon Hartley is the host of the Capitalism and Freedom in the 21st Century Podcast at the Hoover Institution and an economics PhD Candidate at Stanford University, where he specializes in finance, labor economics, and macroeconomics. He is also currently an Affiliated Scholar at the Mercatus Center, a Senior Fellow at the Foundation for Research on Equal Opportunity (FREOPP), and a Senior Fellow at the Macdonald-Laurier Institute. Jon is also a member of the Canadian Group of Economists, and serves as chair of the Economic Club of Miami.
Jon has previously worked at Goldman Sachs Asset Management as well as in various policy roles at the World Bank, IMF, Committee on Capital Markets Regulation, US Congress Joint Economic Committee, the Federal Reserve Bank of New York, the Federal Reserve Bank of Chicago, and the Bank of Canada.
Jon has also been a regular economics contributor for National Review Online, Forbes, and The Huffington Post and has contributed to The Wall Street Journal, The New York Times, USA T
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
[MUSIC]
>> Jon Hartley (00:09):
This is the Capitalism and Freedom the 21st Century podcast,
an official podcast of the HooverInstitution Economic Policy Working Group
where we talk about economics,markets, and public policy.
I'm Jon Hartley, your host today.
My guest is David Beckwourth,who is a senior research fellow at
the Mercatus center andthe host of the Macro Museums podcast.
Welcome, David.
>> David Beckworth (00:27):
Well, thank you for having me on your program.
>> Jon Hartley (00:29):
So, David, it's really fun to have you on here.
I recently was on your podcast.
You're a really big figure in my mindin the sort of macro policy space.
I'm curious, how did you firstget interested in economics?
And how did you get interestedin economics podcasting?
How did that all happen?
>> David Beckworth (00:46):
Well, I took some econ courses in undergrad.
It never dawned on meto become an economist.
This didn't strike me assomething I would do as a career.
But later on, working on an mba, I tooksome more coursework in economics and
it really began to click like,I love this.
And so at that point, I went back,took some more coursework, some more math,
got into a PhD program, went from there.
(01:07):
Now, how I got into podcasting.
Long story short, I startedblogging back in the glory days of
blogging the right afterthe great financial crisis and
great time to be alive asa macroeconomist blogging.
Terrible time for
humanity suffering through the slowrecovery from that period.
But the blogging opened up doors, op eds.
(01:28):
I actually got some books out of it.
And eventually that opened up moredoors to where I got offered a job at
the Mercatus center to be a scholarthere in their policy group.
And then when I got there, I just thought,there's a missing market for podcasts
that touch on macro and regulatoryissues in the financial policy space.
(01:49):
And so I pitched the idea.
It was a little reluctant at first.
Folks didn't think there'd be a market orappetite for such things.
But it's gone well.
We've been running it since 2016.
You've been a guest, a number of guests.
We're getting close to their fifthhundredth episode, so so far, so good.
>> Jon Hartley (02:07):
It's amazing.
I enjoy listening to it andI know many, many others do, and
I think it's fantastic, too.
You spent a good amount of timeworking at treasury previously.
I guess you've always beeninterested in macro issues.
I know you did your PhDat University of Georgia,
and I think George Seljenwas on the faculty then.
(02:31):
I feel like this is maybe whatyou were called to do, and
it's so wonderful to see all thesewonderful shows being produced.
I want to talk about,I think some of the themes that I think
are consistent in your w some ofthe things you've advocated for
throughout the podcast andin your academic writing as well.
(02:54):
I think one of the big things thatyou're very early to was NGDP targeting.
And I'm just curious,could you explain what NGDP or
nominal GDP targeting is toour audience as you see it?
>> David Beckworth (03:08):
Yeah, let me provide a little history how I got into nominal
GDP targeting,because I think that's useful.
So as you mentioned, I went to theUniversity of Georgia and George Selen was
there and he's the one who actually firstintroduced me to nominal GDP targeting.
And at the time he was actuallyselling it as a way to deal with
big positive productivity shocks.
So if we have massive productivity surgelike we had in the early 2000s, late late
(03:32):
1990s, early 2000s, what's the best wayfor Monte policy to deal with that?
And he argued he had a specific formcalled a productivity norm, but
basically it was a formof nominal GDP targeting.
So it was a totally different set ofproblems, but that's where I first saw it.
And then it became popular againafter the 2008, 2009 period.
(03:52):
But here's what it is.
Nominal GDP targeting isan approach where the central bank
would target total dollar spending or
equivalently total dollar income insteadof targeting the inflation rate.
Now over the medium to long run,
you would get a inflationrate with a fallout of that.
Because by targeting totaldollar spending or nominal GDP,
(04:16):
you're implicitly targeting real GDP andthe price level as well.
And if you're targetingsome kind of growth rate,
you're targeting the growth rateof real GDP and an inflation rate.
So what's different about a nominal GDPtarget versus an inflation target is over
the short term, that's the big difference.
Over the med long run, you're probablygoing to be very similar in the outcomes.
(04:37):
In fact, if you look at US GDPnominal GDP measures between crisis,
they look pretty straight.
It looks like the Fed is implicitlytargeting something like a nominal GDP
target, but where they differsin the short run, the short run,
the Fed is much more sensitiveto movements in inflation.
In the short run if theywere targeting nominal GDP,
(05:00):
they would keep their eyes focused onthe growth path of total dollar spending.
And I've mentioned nominal GDP.
Some would measure with finalsales domestic purchasers.
There's even a proposal to targetjust PCE a component of nominal GDP.
But effectively you're aimingto stabilize aggregate demand
(05:22):
directly as opposed to a symptom of it.
The Feds, when it targets inflation,
it's ideally trying to targetinflation being driven by demand and
demand shocks and it tries to see throughsupply shocks that cause inflation.
So what we're saying is cut to the chase,
target directly aggregate demand anddo so by looking at nominal GDP.
>> Jon Hartley (05:43):
So for the viewers that aren't as familiar, so
you've got nominal GDP,you've got real GDP.
Real GDP is basicallynominal GDP minus inflation.
So in other words,nominal GDP is real GDP plus inflation.
And if you look at the postWorld War II US economic era,
(06:06):
you'll see that real GDP Ithink is growing at 4% for
a long time, 3% and 2% more recentyears or more recent decades.
And then NGDP ornominal GDP is roughly depending on,
you know, the inflationary period.
You can add say 2% to thatperhaps obviously much higher
(06:30):
during periods of higher inflation.
So I'm just curiouslike what is the exact.
So we talk about it as like thisis a target the Central Bank since
the early 1990s have beentargeting inflation and
prior to that fora brief period of time in the 80s.
They were targeting monetaryaggregates like M1 and
(06:52):
m2 o how much money isthere in the economy.
But for the past say 30 years or so,
central bank's beentargeting inflation targets.
And I think some people, including myself,would argue that it's been a very
successful program in terms of anchoringlong term inflation expectations.
And also inflation has beenrelatively speaking much lower in
(07:15):
the past few decades,minus the past few years or so.
And we could talk a littlebit about that as well.
But I'm just curious like in your mind,what is the exact policy tool that
allows the central bank toachieve an NGDP target?
I mean we had like interest rates at0% for a long time in the 2010s and
(07:36):
we did lots of QE as sayJapan is getting like.
I think getting NGP to a certain rate or
level target, say a 4% or 5% trend path.
I feel like couldn't, couldn't havebeen possible in the 2000 and tens.
Even if you tried harder.
How could you have gottenNGDP to a higher level?
(08:00):
Say when you're at the lower bound.
I'm curious, how do you think an NGPtarget is really achievable in your mind?
>> David Beckworth (08:06):
If you look at nominal GDP from the end of the Great Recession up
until 2020, the beginning of the pandemic,it looks like a stable 4% growth path.
If you didn't know those two periods,the before and after,
you would think the Fed was effectively.
So the Fed did do something like this.
Now, you could argue it should havebeen faster 5%, that's far fine.
(08:27):
But I would say that concern isa concern that happens no matter what.
You're at the zero lower bound, whetheryou're targeting inflation, a price level
target, a nominal GDP level target,the same issues are going to be there.
And I actually did write somethingin response to this concern and
it would apply toan inflation target as well.
This was at a, I presented this at a Catomonetary policy conference in 2019, and
(08:51):
I recommended kind of a dual approach.
When you're at the zero lower boundary,you follow something like a McCollum Rule.
A McCollum Rule would actually you would,
instead of thinking about interest rates,you would adjust the monetary base.
And a McCollum Rule, by the way,was a very popular rule up,
really up until the Taylor rule comes anddisplaces it and
(09:12):
the adoption of inflation targeting andinterest rates.
But the McCollum rule, which waswell known in the 1980s early 90s,
says that the central bankshould target nominal GDP but
use the monetary base as an instrument.
And a lot of people came to thatsame conclusion once we hit the zero
lower bound, yeah, maybe we shouldrely more on qe, the balance sheet.
(09:35):
Now we can raise questions aboutWallace neutrality policy and
effectiveness proposition,things like that.
But in my paper, I argued what you'd wantto do is you want to do something more
like a McCollum rule where you thinkabout adjusting the base monetary base.
When you're above zero,you're outside the zero lower bound,
you go to a more standard Taylor rule, but
a Taylor rule that has nominal GDP init instead of the regular arguments.
(09:57):
I also argued in that piece, when you fallinto a McCollum rule world where you're at
the zero lower bound, you want to havea fiscal facility to give it the umps,
the very thing thatyou're concerned about.
So I argued, you got to have fiscal policyhand in hand with monetary policy at
the zero lower bound.
That's what the Fed needs now thereare all kinds of problems that come with
(10:19):
that because once you give the centralbanks extra fiscal ability,
then you get into questionsof delegation of authority.
Is this democratically accountable?
But I will leave it at that.
That the same issues applyto the inflation target,
would apply to a nominal GDP targetwhen it comes to zero lower bound.
>> Jon Hartley (10:37):
Well, I do think one difference though is that you're talking
about a level target versus sayan inflation rate target, right?
And so I think something that the Feds,
I guess maybe thought a littlebit about in the past.
But the thing about a levelgrowth target is you can
(11:00):
get these issues, things like hysteresis.
For example,after the Great Recession we had a massive
decline in output orin real GDP and nominal GDP and
it never got back to itspre trend like that,
(11:20):
pre, say 4% or 5% NGDP trend.
Now after having the big collapse, therewas a pretty straight 4 or 5% target.
How do you think about that?
Do you reset the,like what is the target exactly?
Or what's the reset the targetafter a big drop like that or
do you try to get backto the original trend?
(11:43):
How do you think about issues likehysteresis and things like that?
>> David Beckworth (11:47):
That's a great question and really two responses and
it's driven by this question.
Was that collapse something thatcould have been fixed by policy,
monetary, macroeconomic policy?
If your answer is yes, then I wouldhave argued more aggressive monetary and
fiscal policy could have brought usback up some kind of helicopter drop.
(12:08):
Something like we saw in 2021 where we sawa complete collapse of the dollar size,
the economy.
But we saw a quick bounce back and
I think that partly had to do withthe fact that it was supply shock.
So there's going to be some quickrecovery, but then also the incredible
excessive amount of fiscal supportas well kind of closed that gap and
then went above where it should have gone.
(12:29):
So if you believe that the collapse afterthe Great Recession was something that
could have been fixed with policy,then yeah, you use aggressive policy.
If you think it was a permanent structuralchange that wouldn't have mattered,
then this is where I would go.
And this would be also how would youdeal with a nominal GDP level target?
Let's say there's no crisis butpotential real GDP changes.
(12:51):
And this is often a question I get,well, how do you know?
Okay, sure you embed 2% inflation in that,but what if potential real GDP changes?
What if it grows from 2% right now?
To 2.5 to 3%.
Or in the case you just suggested,what if it goes from 3% down to 1%,
some big shock in that case,you have to update your target.
Now, generally, changes in potentialrules GDP are slow moving.
(13:15):
Generally it's a very gradualadjustment of the target.
So it's not gonna be something that'sterribly hard to think about or
to process or even to implement.
And what I would recommend is you wouldfollow some kind of consensus measure
where potential rule GDP is going.
Now, going back to 2008, my view is thatthat collapse could have been avoidable.
(13:39):
I think we could have returned backto the same growth path or level.
I think it would have taken moreaggressive macroeconomic policy.
It would have required the Fedbeing aggressive as it was,
but also announcing a level target.
I think level target goes a long ways.
It's a signal.
In fact, level targeting was somethingreally big in the New Keynesian
(14:00):
literature, as you know, Michael Woodford,Gut Ergensen, and, and for
them it was forward guidance.
Wait for the march,>> Jon Hartley: I guess, right?
Yeah, except just to get things up.
In fact, all of that Princeton School,
Scott Sumner has a paper calledthe Princeton School of Macro.
All of them were thinking about Japan.
Krugman, Sinson, Gotti,Ergensen, Michael Woodford.
They were all there at that time thinkinglong and hard, how do we get out of Japan?
(14:23):
And all of them were very keen abouta permanent increase in the price level,
getting the price level back up.
And many of them would talk about, well,
we need to have a permanentincrease in the monetary base.
Well, the thing is, what is a permanentincrease in the monetary base?
That's effectively.
It's a non Ricardian fiscal regimewhere you promise not to raise taxes in
(14:43):
the future.
It's a policy move where you donot change what you're doing.
What happened after 2008?
There was a commitment toshrink the Fed's balance sheet.
There wasn't the fiscal support.
I think a policy differencecould have been different and
we could have returned it.
But over time, as time goes on you come torealize, okay, that's not going to happen.
We're at a new norm.
You adjust your target.
(15:05):
And that's one reason, Jon, I came up withthis measure called the nominal GDP gap,
or a neutral measure of nominal GDP.
It's based on consensus forecast and itgradually does because if you simply draw
trend lines,at some point they become outdated.
Eventually expectations change, peopleupdate their views, contracts change.
(15:26):
And soyou want to have a flexible understanding.
And I think that's truewith a nominal GDP target.
Eventually potential real GDP will change,and so you gradually,
slowly update your yournominal GDP target.
But again,there normally wouldn't be big swings.
>> Jon Hartley (15:41):
How would you deal with the fact that like,
I guess a GDP is published like 2months after the end of the quarter.
Unlike say, unemployment or CPI,
they're published prettyclose to the reference month.
How would you deal with that fact?
I know some people talked about NGDPfutures markets and things like that.
Like that.
How do you deal with the factthat I guess, you know,
(16:04):
you wouldn't even get NGDP estimatesin a real time kind of fashion.
I mean maybe you want to get the BEA or[INAUDIBLE] start publishing it more
quickly, but I don't know ifhow feasible that would be.
>> David Beckworth (16:16):
Yeah, great question.
Probably the two biggest questionsI get about nominal GDP targeting,
it's that one,the data revisions are huge.
One, they come out, like you said,delayed and secondary, sometimes huge.
And the other one is the potentialworld GDP, that one.
So I think I've addressedthe potential world GDP.
This one I think is probablymore of a challenge.
But there's I thinkseveral responses to it.
(16:38):
You, you mentioned what I thinkwould be the gold standard and
nominal GDP futures market, butthat's nowhere in the works.
I don't want to bank on that.
I want to bank on reality.
What could we actually do?
So what I, what I suggest isagain going to a forecast,
going to consensus forecast orwhere nominal GDP is going.
And even if the measuresare awful over time,
(17:00):
a long consensus forecast is very helpful.
You mentioned Lars Findsen,he says target the inflation forecast.
So it's useful andwe provide some workaround to that.
Again, this nominal GDP gap measureI have created, which also implies
a neutral level nominal gdp, I havea real time measure versus the ex post.
(17:25):
After all the big revisions, even the fiveyear revisions, and they aren't that big,
there would have been some periodswhere there have been differences, but
again the big differences wouldn't havemade much significance in terms of vast
changes in setting the interest rates,things like that,
because I do tie it to a policy rule,a reaction function.
So I would say target the forecastis probably the easiest thing to do,
(17:47):
number one.
Number two though,
I think there's also the ability to relyon many multiple real time measures.
There's, there's monthlyreal time measures.
You could put that togetherwith a forecast of inflation.
This is just one example andI'm sure there's more out there.
But Lars Christensen, who's also anadvocate of nominal GDP targeting, he for
(18:07):
example has tinkered around with thisweekly economic indicator series.
Used to be the New York Fed andI believe the Dallas Fed now publishes it.
And he takes that, andtakes an inflation breakeven forecast and
combines those two together andkind of gets a real time sort
of forecast look at where hethinks the economy is going.
(18:29):
He does it every month.
I mean the Data for the weeklyseries is weekly on the real side.
So there's,I think there's many ways to do that.
There's real time indicatorsyou could use as proxies.
PCE comes out monthly.
That's why some have advocated thatthere's revisions to that as well.
Of course there's the market basedversion of PCE you could rely on.
But I would say, you know,use the real time data sources available.
(18:51):
So number one forecast,number two, more real time.
And the third point I wouldbring up you touched on and
I would say that the data issomewhat endogenous to the target.
If you were to adopt a nominal GDP target,I guarantee the Fed
would find ways spend resourceson getting data that would better
(19:12):
inform it on what's happening to the,the current measure.
Again, there's differentways to measure it.
May I should be very clear about this.
I said nominal GDP ortotal dollar spending.
You could look at final sales, othershave just looking at gross labor income.
Some have looked at pce.
So there's different ways tokind of slice this up but, and
(19:34):
each one may have certain advantagesin terms of data collection.
But I do think the datachallenge is surmountable and
even with the data we have now we,I think there's ways to use it.
We have a framework review coming up,as you know, and
we've written a number of policy briefs.
And my policy brief,
I definitely would love to see the Fedgo all in to a nominal GDP level target.
(19:55):
I know they won't.
So my recommendation has been,many others,
is simply use something like forecastnominal GDP as kind of a cross check.
Use your standard indicator,labor market indicators, things like that.
But also look at forecast of nominal GDP.
Plug them into a reaction function,see what they say.
You were at the American Economicassociation meetings.
(20:18):
Jason Furman was there.
He recently talked about,he's finding his religion again for
monetary policy rules, you could have arule that has nominal GDP forecast in it.
And again you don't have to go all in butyou use it as a cross check.
>> Jon Hartley (20:32):
Interesting.
Yeah, I mean it's interesting, I guess,that the proposal on rules is really using
them more like a guideline ora benchmark or something like that.
That's interesting thought.
I mean, correct me if I'm wrong.
I don't think we have any centralbanks around the world yet
doing NGDP like targeting.
I don't know how close we've come.
I know Bernanke has said some positivethings maybe once or twice in the past.
(20:58):
But I'm just curious, assuming that we'renot adopting NGP targets anytime soon for
maybe some of the challengesthat we've sort of outlined,
I really want to talk about maybejust inflation targeting and
its kind of different variants fora little bit.
You've been doing a lot of really greatwork, along with other scholars that
(21:18):
Mercatus getting prepared forthe next Fed policy framework review.
And I'm curious what your thoughtsare on the flexible average inflation
targeting regime that we've been in fornearly five years or so.
That was sort of really the brainchildof former Fed Vice Chair Rich Clarida.
(21:39):
This was a framework that they putout really right before the big
inflationary spiral thatoccurred in the early 2000s.
In part, I think the flexible averagetargeting was in part responding
to this period where the Fed wasn'table to hit its 2% inflation target for
(21:59):
many years in the 2010s andwas coming in below.
But you know, at some level,I think there's maybe, I don't know,
I feel like a little bit of regretin the sense that, you know,
I think that the fate or flexible averageinflation target was a bit flawed in that,
you know, it wasn't really clear,you know,
if we were going to take some average oversome period of time, it wasn't clear,
(22:23):
you know, what period of time oryears we were averaging over.
You know, the Fed generally,historically has followed, you know,
a year over year orone year look back window.
Right.
But how many years back would it be?
How flexible would it be?
So I think we're all sold, or at least I'msold on inflation targeting in general.
(22:45):
We could debate what exactlythe right target should be.2% or.
Paul Volcker, for example, was pushing for
a 0% inflation target the rest of hislife after leaving the Fed chair or
leading the Fed board,as did other central bankers.
In fact, in the early 90s,John Crow at the Bank of Canada argued for
(23:08):
0% inflation target too.
But in terms of, you know, the F andthe a, you know, averaging,
thinking about levels versus rates ofchange and where do you fall on all that?
If we can't have an NGDP target, we haveto stick to inflation at some level.
How do you think about that?
Do you think that the Fed's flexibleaverage inflation targeting regime's
(23:30):
been successful or do you think thatgoing forward the Fed will abandon it and
so will monetary policy scholars?
>> David Beckworth (23:38):
Well, based on what Jay Powell said to Catherine Rampel at
The Washington Post back in November,he had a sitdown with her and
she asked him about the review.
And he said his base case scenariois a reaction function, ie,
a Taylor rule that does not promiseto make up for past misses or
promise to overshoot Shoot the targetif they've undershot, which I find
(24:01):
a little troubling because that to merules out makeup policy altogether.
And I guess the one thing Iwould encourage FOMC members,
if they're listening to this, is we wannamaintain, hold on to makeup policy.
I do think fate was not the best wayto do it, but fate did introduce it.
I will say this,
FAIT I think is an historic seachange in terms of monetary policy.
(24:24):
It's the first time a central bank hastalked about targeting something like
a price level.
Now, I should take that back.
I believe the Reichsbank in Sweden didprice level targeting explicitly for
a while, 1930s, maybe 1940s.
It's a while back.
But modern central banking,the Federal Reserve and
FAIT is the first central bank toincorporate several decades of research
(24:48):
literature about zero lower bound aboutmakeup policy board guidance in terms of
a framework that I think you could alsocall temporary price level targeting.
The Bernanke, a version of it,Rich Claire to call it a version of it.
So I think it's a step, it's progress.
I would do thingsa little bit differently.
And my worry is that they're gonnacompletely throw the baby out with
(25:10):
the bath water.
At least that's the signal they've sent.
And, and every place I've been,I've heard FOMC members say, yeah,
bait was designed fora different period, which is true.
There's been several conferences on thisat Hoover, multiple events at Brookings.
They've talked about this,papers have been written.
In fact, the paper that I wrote up,
(25:31):
I kinda summarized what I thought was theconsensus from all these different talks.
But there were a numberof critiques of FAIT.
And maybe we should step back and
just remind our listeners whatactually happened in fate.
So prior to FAIT,flexible average inflation targeting,
the Federal Reserve and FOMC had FAITfit flexible inflation targeting,
which was officially introduced in 2012.
(25:52):
So there was a consensus statement.
In that consensus statement,it outlined 2% PCE inflation.
That statement, though, also had in itthe other part of the dual mandate,
maximum employment.
And it talked about deviations,no numbers, but deviations.
So it had both sides of the dual mandate.
So you can call it a flexible inflationtarget because it's aiming for
(26:14):
2% inflation.
But it also has its eye on avoidingbusiness cycles, full employment.
We go to 20.
>> Jon Hartley (26:20):
It was the first time that the Fed had ever actually announced that
it was targeting inflation.
Yes, it was very late to the game manyof the other big advanced economy
central banks hadannounced this by the 90s.
2012 was actually relatively pretty latecompared to the other central banks.
>> David Beckworth (26:37):
Yeah, and to be fair to the Fed though they were implicitly
doing something close to two by the earlyto mid-90s least some studies have
found that they were there,but not officially there.
Like it took Ben Bernanke coming onboard and really talking them into it.
But there, there are discussions in thetranscripts back in the 90s about should
we go to an official target.
But you're right, 2012, but
(26:58):
that consensus statement becomeskind of like a constitution for it.
And this is again another reason why I'ma little worried about them completely
throwing out the makeup part.
So 2020, they changed it quiteradically to include there's gonna
be makeup policy on the inflationtarget if it's below, not if above.
So if you're below, you make up frombelow and then once you go above,
(27:20):
it's just regular flexibleinflation targeting.
So that's very much in the spirit ofBernanke's temporary price level target.
You try to maintain the price level path,but you only do so if you're below.
If you're above,you let bygones be bygones.
The other big change was onthe maximum employment part.
Instead of having deviationswould be something the FOMC
would be concerned about.
(27:41):
They then said shortfalls.
So only if the economy was, was weak orcold relative to potential would
they respond if it wasoverheating off the table.
At least according tothe language of FAIT.
Of course, the Federal Reserve abandonedthose principles in 2022 [LAUGH] when
labor markets were clearly overheating andthey started raising rates.
(28:02):
So the FAIT introducedthose two asymmetries.
They would only do makeuppolicy from below 2% and
they would only respond toshortfalls from maximum plum.
That was a big sea change.
Now, the challenges in thoseone I think a fair critique.
A lot of people, Gotti Ergenson andDon Kohn have a paper,
a number of people havewritten along this.
(28:23):
The Roamers had a paper recently and inone sense fate was fighting the last war,
the last decade of zero lower bound.
You want a framework that can handle anysituation, not just the low inflation.
That's, that's fair, totally fair.
Also there's, there's concerns aboutwhat does it mean to be makeup policy
doing makeup, how all, how high, howlong above before we go back to two what
(28:47):
is a shortfall andhow much do you respond.
So there's a lot of uncertainty andthere wasn't much clarity on that.
There's also some concern that this wasputting more weight on maximum employment.
Both the roamers and again Gotti ErgensenDon Kohn said FAIT effectively put more
weight on maximum employment thanthe priceability part of the dual mandate.
(29:09):
So it added an inflationary bias, whichis fine if you're in a zero lower bound
world, but if you're outside of that,you don't want that.
So there's definitely room to recalibratethis, make it more effective.
But I do worry if you completely throwout again the baby with the bath water,
I'll make a policy thatthey'll have gone too far.
So what I recommend they do is use nominalGDP level targeting as a benchmark and
(29:32):
any incremental change you make,have it move in that direction again.
They're not going to go all the way there.
But so here's what I would recommend.
I would recommend gettingrid of the shortfalls part,
go back to deviation soit's both above and below.
And there's been some other great work,Michael Kiel.
>> Jon Hartley (29:47):
A symmetric target is one thing that you want.
>> David Beckworth (29:48):
Yes, yes, a symmetric target, Michael at least on the,
on the maximum employment side,Michael Kiel did some work where
he showed using models that if yourespond systematically to shortfalls,
ironically you make more shortfalls inthe future because you're kind of not
responding to the overheating and you canactually exacerbate the business cycle.
(30:09):
If you respond symmetrically,then things can actually be better.
On the inflation side, I don't thinkit's great that they respond from below
only for communication purposes, butI do get why they would do that and
I would recommend at this point to keep,keep that part.
(30:30):
And let me go back to the original again,motivation idea behind this as I
understand, and that's Brandon Bernanke'stemporary price level target.
>> Jon Hartley (30:39):
Which is metric target to some degree.
>> David Beckworth (30:42):
Yeah, well, it's very similar to FAIT.
It just doesn't have all the languageabout the maximum employment.
It also says if you're below 2% belowyour target, you run the economy hot.
You actually have inflation above your 2%until the price level gets back on its
original trend path, but you don't.
>> Jon Hartley (30:58):
[INAUDIBLE] the paper for those that are listening,
this is a Brookings paper thatBen Bernanke wrote in the late 2010s.
It was very influential prior to the Fed.
>> David Beckworth (31:05):
Yeah.
[INAUDIBLE]>> David Beckworth: And
the reason he gave forwhy you would only do it from below,
which is what fate is is because he said,look,
what if you have inflation above 2% andit's driven by negative supply shocks?
So the economy is contracting already,inflation is going up.
Why would you want to undershoot forseveral peers?
(31:27):
You'd add more,
more harm to the economy on top ofthe negative supply shock already.
And that I agree with that.
And that's exactly why you would want todo something like a nominal GDP target.
I didn't mention this earlier,but one of the big reasons for
nominal GDP targeting is it's a wayto work around supply shocks.
We don't know in real time whetherinflation is caused by demand or supply.
(31:48):
We maybe we can figure out,look at the news, but it's really hard,
it's not clear in the data.
And we know 21, 22, all this talk about isthis transitory inflation or permanent?
That's another way of saying is this.
Driven by temporaryidiosyncratic supply shocks or
just something more permanent andwe simply don't know.
So instead of trying to play God andfigure that out,
(32:09):
look at the total demand in the economy.
Keep total demand, total spending stableand those shocks will work themselves out.
And if, and if you're way above the trendpath, whatever your target may be for
total spending,then maybe you have some issues.
So the supply shock wasa very reason Bernanke had
a below asymmetric priceprice level target.
(32:30):
And I say look, that's great,why don't you go all the way?
If you go all the way,take the logic to its limit,
you end up with the nominal GDPlevel target you mentioned.
Bernanke endorsed it.
Christina Romer endorsed itin the 2011 New York Times.
She even had an op Ed saidBen Bernanke needs his Volcker moment.
And in the op Ed she saidhe needs to go all in and
(32:52):
adopt a nominal GP level target.
Michael Woodford A lot ofpeople have endorsed this for
a zero lower bound world.
There's other arguments more recently thatwe could talk about if you want for, for
doing that as well.
But back to fate.
I, I just hope they don't completely throwout everything and go back to fit flexible
inflation target because I think there'ssome things we want to keep interesting.
>> Jon Hartley (33:13):
Well, I know I, I feel like the Fed certainly, I think before any
kind of framework, any meaningfulframework change I feel like has
to sort of get inflation back to 2% andsort of to kind of ensure its
credibility before really thinkingtoo much about maybe further changes.
(33:34):
And I know there's some people out therewho advocate for a 3% inflation target.
But I think getting inflationback to 2% in a sustainable
fashion is kind of first andforemost, my last sort of question or
sets of questions here isreally about Fed plumbing.
And you've written and spoken a lotabout this through your podcasts and
(34:00):
this gets back to the kind ofabundant reserve system and
how much 2008 andthe first rounds of quantitative
easing really changed howthe plumbing around the Fed and
the short term money markets really work.
So one thing that's happened iswe used to be in the system,
(34:26):
some might call reserve neutrality ora scarce reserve system.
And that was a system where you do openmarket operations that would move the Fed
funds market andthat's all the Fed needed to do.
But since 2008, because the moneysupplies has been shifted so
(34:46):
far out to the right or we have what'scalled an abundant reserve system.
Now the Fed,in order to raise interest rates,
has to actually use price floors, sothings like interest on excess reserves,
the reverse repo rates and so forth.
And that's how it's able to raiseinterest rates without unwinding
(35:08):
all the quantitative easingthat it's done in the past.
And so the Fed's been in the systemwhere it's now been able to both
adjust interest rates while alsohaving a Fed balance sheet that
has trillions of dollars of long termassets on it, lots of quantitative easing.
(35:29):
Part of this also changesthe system of from those
that are familiar corridors andfloors, and
this kind of gets back tothe whole reverse repo IOE up
versus IBeer rates being part of,say an abundant reserve system.
(35:50):
Can you explain us, what the differencebetween corridors and floors are and
can you explain sort of what's going onnow and that with Fed or sort of with
various central banks winding down ortrying to wind down their balance sheets
now that we're sort of in better times nowand have been trying to escape inflation.
Can you explain what the shift that'skind of going on now where central banks
(36:14):
are really trying to get away from theabundant reserve supply driven system to
some degree, and maybe with the exceptionof the Fed trying to incrementally get
back to a demand driven system andmaybe not fully a quarter system.
But can you explain what all thismeans and where things are at and
where things you think are going?
>> David Beckworth (36:36):
Yeah.
So you've covered a lot of ground there.
Prior to 2008 in the US and in many placesaround the world for advanced economies,
most central banks were operating onsome version of a corridor system.
So it's also called scarce reserve system.
Bill Nelson calls ita necessary reserve system.
But very few reserves were actually inthis system, at least compared to today.
(36:59):
Very few reserves in the systemalso compared to the currency.
So in terms of central bank liabilities ismostly currency, a little bit of reserves.
And the interest rate thatwas set on those reserves was
determined in some interbank market.
Banks would lend their excessreserves to each other.
And in the case of the US it wasthe federal funds market and
(37:20):
all that the Fed would do, the Fed wouldadjust the size of its balance sheet,
inject or pull out reserves liabilities,and that would move the supply up and
down a downward sloping demand curve forreserves.
So if the Fed wanted to target 5% interestrates, it would adjust supply and
then you would be on that.
And it required very few reserves,it was scarce.
(37:41):
As you said, at the other extreme,where we are today,
you have a floor system where youincrease the supply of reserves so
much you get to a part of the demandcurve for reserves that's flat.
And when you get to that point,no matter how many reserves you increase,
even decrease some,it's gonna be at that level.
(38:02):
And typically that kicks in duringa zero lower bound environment.
But when you add administrative rates,you mentioned interest on reserves,
you also mentioned overnight reverse repo.
That's kind of likethe leaky floor system.
Sometimes market rates don't stayat that interest in reserve.
So the Fed had introduced another way tomaybe clog that floor overnight reserves.
(38:24):
So the Fed can preventrisk from going down.
Now on the top, it also has interestrates from it going too high.
It has a discount window rates, it hasthe also the standard repo facility.
So the Fed has these facilitiesthat try to keep rates within it.
And given that their administrative rates,it's in a very narrow window.
And if in a perfect world wedidn't have market frictions,
(38:47):
it would be like a straight line.
But it's not quite that way.
There are arguments for both systems.
So the scarce reserve system,you have a very small balance sheet.
So the financial footprint ofthe Federal Reserve is much less.
You also have a close link betweenthe size of the balance sheet and
monetary policy itself.
So if you wanted the Fed to again changepolicy, you would have to increase or
(39:10):
decrease reserve,change its balance sheet.
Today that's not the case, you noted this.
The Fed can simply changean administrative rate without changing
the size of its balance sheet.
Now for advocates of the floor system,that's a big deal because then the Fed can
inject liquidity into say,a strained banking system without
affecting the stance of monetarypolicy via interest rates.
(39:32):
For advocates of a corridor system, they'dsay that might be a bad thing because if
you have a system like that,it becomes a temptation to politicians.
So you're telling me, Fed, that youcan keep interest rates pegged and
increase your balance sheet, but
why don't you buy up a bunch of bonds tobuild a wall or to fund a green New Deal?
And so the balance sheet, if it lookslike a free lunch, it's really not.
(39:52):
But as you know, is a good economist, but
to many politicians itbecomes a free lunch.
So there's arguments for and against.
There's also questions of what's easy.
Advocates of the floor system said thiswill be super easy because we're using
administrative rates.
Hasn't turned out soeasy as many expected.
Also, when you have a corridorscarce reserve system,
(40:14):
it relies much more onbanks to fund each other.
And we have largely lost that in the US.
The federal funds marketis a shell of itself.
And this is a nice transition tothe second part of your question.
Other central banks around the worldare actually gradually moving back.
They're a long ways from a corridorsystem, but they're gradually moving away
from supply driven kind of ample,abundant reserve system.
(40:36):
And their motivation has been twofold.
Number one, there's been a lot of losseson central bank balance sheets and so
the fiscal authorities, parliaments,they're worried about that.
But secondly, andparticularly in the case of ECB,
because I talked to Isabel Schnabelon the podcast about this,
their motivation for going back wasto resurrect the overnight unsecured
(40:57):
interbank market where banks wouldlend to each other unsecured.
Well, if you're going to lend unsecured,
you better know yourcounterparty really well.
So there's price discovery, there's,there's learning about new risk that are,
that currently is missing.
You don't find this in any other marketand they, they want to resurrect that.
Now again, we're not probably going togo to balance sheets the size they were
(41:17):
before 2008 butin my mind that's a great step.
We're going back,we're getting the markets more involved.
Banks rely on each other less.
On the central bank forliquidity in the US it hasn't happened,
I think in part because of someof the financial regulations.
I think there's just some complacency.
I think you get the right people atthe Fed though, things could change.
(41:38):
And I think ultimatelyyou alluded to earlier,
we were slow to adopt inflation targeting.
The rest of the worldwas on that bandwagon.
I think eventually we'll, we'll have tocome around as well just because the cost
of maintaining large balance sheets arejust going to continue to grow over time.
And I think doing more moving in directionof something between a floor and
(42:00):
a scarce reserve system,a corridor system might be useful.
The central bank of Norway,the Norges Bank,
it has something calleda tiered reserve system.
Loretta Mester has advocated somethinglike this where some of the reserves
are remunerated.
They do get something at the bank,but many of them do not.
And so it's kind of a compromise.
I think that's where the world is going,and I suspect with enough time,
(42:24):
the Fed will be there, too.
>> Jon Hartley (42:25):
Interesting.
I mean, it's fascinating.
We've been in this period for almost20 years of era of big balance sheets,
big central bank balance sheets, lots ofquantitative easing, abundant reserves.
It's interesting to see now centralbanks really sort of trying to
think about some sort of an exit strategy,the extent that it's possible.
(42:48):
And I still don't think we're necessarilygetting back to where we were
prior to the global financialcrisis anytime soon.
But it's very interestingto hear about these sort
of alternatives that other centralbanks around the world are doing.
A real honor to have you on, David,and hear about your career and ideas.
I know there's somuch we could talk about and
(43:08):
I would love to have youon again at some point.
I really want to thank you for joining usand really for the great service that I
think you've done for the economics andmacroeconomics and finance community with
all the wonderful podcasts and writingthat you've been doing over the years.
>> David Beckworth (43:24):
Well, thank you for having me on your program.
>> Jon Hartley (43:26):
This is The Capitalism and Freedom in the 21st Century Podcast,
an official podcast forthe Hoover Economic Policy Working Group,
where we talk about economics,markets, and public policy.
I'm Jon Hartley, your host.
Thanks so much for joining us.
[MUSIC]
[MUSIC]
>> Jon Hartley (00:09):
This is the Capitalism and Freedom the 21st Century podcast,
an official podcast of the HooverInstitution Economic Policy Working Group
where we talk about economics,markets, and public policy.
I'm Jon Hartley, your host today.
My guest is David Beckwourth,who is a senior research fellow at
the Mercatus center andthe host of the Macro Museums podcast.
Welcome, David.
>> David Beckworth (00:27):
Well, thank you for having me on your program.
>> Jon Hartley (00:29):
So, David, it's really fun to have you on here.
I recently was on your podcast.
You're a really big figure in my mindin the sort of macro policy space.
I'm curious, how did you firstget interested in economics?
And how did you get interestedin economics podcasting?
How did that all happen?
>> David Beckworth (00:46):
Well, I took some econ courses in undergrad.
It never dawned on meto become an economist.
This didn't strike me assomething I would do as a career.
But later on, working on an mba, I tooksome more coursework in economics and
it really began to click like,I love this.
And so at that point, I went back,took some more coursework, some more math,
got into a PhD program, went from there.
(01:07):
Now, how I got into podcasting.
Long story short, I startedblogging back in the glory days of
blogging the right afterthe great financial crisis and
great time to be alive asa macroeconomist blogging.
Terrible time for
humanity suffering through the slowrecovery from that period.
But the blogging opened up doors, op eds.
(01:28):
I actually got some books out of it.
And eventually that opened up moredoors to where I got offered a job at
the Mercatus center to be a scholarthere in their policy group.
And then when I got there, I just thought,there's a missing market for podcasts
that touch on macro and regulatoryissues in the financial policy space.
(01:49):
And so I pitched the idea.
It was a little reluctant at first.
Folks didn't think there'd be a market orappetite for such things.
But it's gone well.
We've been running it since 2016.
You've been a guest, a number of guests.
We're getting close to their fifthhundredth episode, so so far, so good.
>> Jon Hartley (02:07):
It's amazing.
I enjoy listening to it andI know many, many others do, and
I think it's fantastic, too.
You spent a good amount of timeworking at treasury previously.
I guess you've always beeninterested in macro issues.
I know you did your PhDat University of Georgia,
and I think George Seljenwas on the faculty then.
(02:31):
I feel like this is maybe whatyou were called to do, and
it's so wonderful to see all thesewonderful shows being produced.
I want to talk about,I think some of the themes that I think
are consistent in your w some ofthe things you've advocated for
throughout the podcast andin your academic writing as well.
(02:54):
I think one of the big things thatyou're very early to was NGDP targeting.
And I'm just curious,could you explain what NGDP or
nominal GDP targeting is toour audience as you see it?
>> David Beckworth (03:08):
Yeah, let me provide a little history how I got into nominal
GDP targeting,because I think that's useful.
So as you mentioned, I went to theUniversity of Georgia and George Selen was
there and he's the one who actually firstintroduced me to nominal GDP targeting.
And at the time he was actuallyselling it as a way to deal with
big positive productivity shocks.
So if we have massive productivity surgelike we had in the early 2000s, late late
(03:32):
1990s, early 2000s, what's the best wayfor Monte policy to deal with that?
And he argued he had a specific formcalled a productivity norm, but
basically it was a formof nominal GDP targeting.
So it was a totally different set ofproblems, but that's where I first saw it.
And then it became popular againafter the 2008, 2009 period.
(03:52):
But here's what it is.
Nominal GDP targeting isan approach where the central bank
would target total dollar spending or
equivalently total dollar income insteadof targeting the inflation rate.
Now over the medium to long run,
you would get a inflationrate with a fallout of that.
Because by targeting totaldollar spending or nominal GDP,
(04:16):
you're implicitly targeting real GDP andthe price level as well.
And if you're targetingsome kind of growth rate,
you're targeting the growth rateof real GDP and an inflation rate.
So what's different about a nominal GDPtarget versus an inflation target is over
the short term, that's the big difference.
Over the med long run, you're probablygoing to be very similar in the outcomes.
(04:37):
In fact, if you look at US GDPnominal GDP measures between crisis,
they look pretty straight.
It looks like the Fed is implicitlytargeting something like a nominal GDP
target, but where they differsin the short run, the short run,
the Fed is much more sensitiveto movements in inflation.
In the short run if theywere targeting nominal GDP,
(05:00):
they would keep their eyes focused onthe growth path of total dollar spending.
And I've mentioned nominal GDP.
Some would measure with finalsales domestic purchasers.
There's even a proposal to targetjust PCE a component of nominal GDP.
But effectively you're aimingto stabilize aggregate demand
(05:22):
directly as opposed to a symptom of it.
The Feds, when it targets inflation,
it's ideally trying to targetinflation being driven by demand and
demand shocks and it tries to see throughsupply shocks that cause inflation.
So what we're saying is cut to the chase,
target directly aggregate demand anddo so by looking at nominal GDP.
>> Jon Hartley (05:43):
So for the viewers that aren't as familiar, so
you've got nominal GDP,you've got real GDP.
Real GDP is basicallynominal GDP minus inflation.
So in other words,nominal GDP is real GDP plus inflation.
And if you look at the postWorld War II US economic era,
(06:06):
you'll see that real GDP Ithink is growing at 4% for
a long time, 3% and 2% more recentyears or more recent decades.
And then NGDP ornominal GDP is roughly depending on,
you know, the inflationary period.
You can add say 2% to thatperhaps obviously much higher
(06:30):
during periods of higher inflation.
So I'm just curiouslike what is the exact.
So we talk about it as like thisis a target the Central Bank since
the early 1990s have beentargeting inflation and
prior to that fora brief period of time in the 80s.
They were targeting monetaryaggregates like M1 and
(06:52):
m2 o how much money isthere in the economy.
But for the past say 30 years or so,
central bank's beentargeting inflation targets.
And I think some people, including myself,would argue that it's been a very
successful program in terms of anchoringlong term inflation expectations.
And also inflation has beenrelatively speaking much lower in
(07:15):
the past few decades,minus the past few years or so.
And we could talk a littlebit about that as well.
But I'm just curious like in your mind,what is the exact policy tool that
allows the central bank toachieve an NGDP target?
I mean we had like interest rates at0% for a long time in the 2010s and
(07:36):
we did lots of QE as sayJapan is getting like.
I think getting NGP to a certain rate or
level target, say a 4% or 5% trend path.
I feel like couldn't, couldn't havebeen possible in the 2000 and tens.
Even if you tried harder.
How could you have gottenNGDP to a higher level?
(08:00):
Say when you're at the lower bound.
I'm curious, how do you think an NGPtarget is really achievable in your mind?
>> David Beckworth (08:06):
If you look at nominal GDP from the end of the Great Recession up
until 2020, the beginning of the pandemic,it looks like a stable 4% growth path.
If you didn't know those two periods,the before and after,
you would think the Fed was effectively.
So the Fed did do something like this.
Now, you could argue it should havebeen faster 5%, that's far fine.
(08:27):
But I would say that concern isa concern that happens no matter what.
You're at the zero lower bound, whetheryou're targeting inflation, a price level
target, a nominal GDP level target,the same issues are going to be there.
And I actually did write somethingin response to this concern and
it would apply toan inflation target as well.
This was at a, I presented this at a Catomonetary policy conference in 2019, and
(08:51):
I recommended kind of a dual approach.
When you're at the zero lower boundary,you follow something like a McCollum Rule.
A McCollum Rule would actually you would,
instead of thinking about interest rates,you would adjust the monetary base.
And a McCollum Rule, by the way,was a very popular rule up,
really up until the Taylor rule comes anddisplaces it and
(09:12):
the adoption of inflation targeting andinterest rates.
But the McCollum rule, which waswell known in the 1980s early 90s,
says that the central bankshould target nominal GDP but
use the monetary base as an instrument.
And a lot of people came to thatsame conclusion once we hit the zero
lower bound, yeah, maybe we shouldrely more on qe, the balance sheet.
(09:35):
Now we can raise questions aboutWallace neutrality policy and
effectiveness proposition,things like that.
But in my paper, I argued what you'd wantto do is you want to do something more
like a McCollum rule where you thinkabout adjusting the base monetary base.
When you're above zero,you're outside the zero lower bound,
you go to a more standard Taylor rule, but
a Taylor rule that has nominal GDP init instead of the regular arguments.
(09:57):
I also argued in that piece, when you fallinto a McCollum rule world where you're at
the zero lower bound, you want to havea fiscal facility to give it the umps,
the very thing thatyou're concerned about.
So I argued, you got to have fiscal policyhand in hand with monetary policy at
the zero lower bound.
That's what the Fed needs now thereare all kinds of problems that come with
(10:19):
that because once you give the centralbanks extra fiscal ability,
then you get into questionsof delegation of authority.
Is this democratically accountable?
But I will leave it at that.
That the same issues applyto the inflation target,
would apply to a nominal GDP targetwhen it comes to zero lower bound.
>> Jon Hartley (10:37):
Well, I do think one difference though is that you're talking
about a level target versus sayan inflation rate target, right?
And so I think something that the Feds,
I guess maybe thought a littlebit about in the past.
But the thing about a levelgrowth target is you can
(11:00):
get these issues, things like hysteresis.
For example,after the Great Recession we had a massive
decline in output orin real GDP and nominal GDP and
it never got back to itspre trend like that,
(11:20):
pre, say 4% or 5% NGDP trend.
Now after having the big collapse, therewas a pretty straight 4 or 5% target.
How do you think about that?
Do you reset the,like what is the target exactly?
Or what's the reset the targetafter a big drop like that or
do you try to get backto the original trend?
(11:43):
How do you think about issues likehysteresis and things like that?
>> David Beckworth (11:47):
That's a great question and really two responses and
it's driven by this question.
Was that collapse something thatcould have been fixed by policy,
monetary, macroeconomic policy?
If your answer is yes, then I wouldhave argued more aggressive monetary and
fiscal policy could have brought usback up some kind of helicopter drop.
(12:08):
Something like we saw in 2021 where we sawa complete collapse of the dollar size,
the economy.
But we saw a quick bounce back and
I think that partly had to do withthe fact that it was supply shock.
So there's going to be some quickrecovery, but then also the incredible
excessive amount of fiscal supportas well kind of closed that gap and
then went above where it should have gone.
(12:29):
So if you believe that the collapse afterthe Great Recession was something that
could have been fixed with policy,then yeah, you use aggressive policy.
If you think it was a permanent structuralchange that wouldn't have mattered,
then this is where I would go.
And this would be also how would youdeal with a nominal GDP level target?
Let's say there's no crisis butpotential real GDP changes.
(12:51):
And this is often a question I get,well, how do you know?
Okay, sure you embed 2% inflation in that,but what if potential real GDP changes?
What if it grows from 2% right now?
To 2.5 to 3%.
Or in the case you just suggested,what if it goes from 3% down to 1%,
some big shock in that case,you have to update your target.
Now, generally, changes in potentialrules GDP are slow moving.
(13:15):
Generally it's a very gradualadjustment of the target.
So it's not gonna be something that'sterribly hard to think about or
to process or even to implement.
And what I would recommend is you wouldfollow some kind of consensus measure
where potential rule GDP is going.
Now, going back to 2008, my view is thatthat collapse could have been avoidable.
(13:39):
I think we could have returned backto the same growth path or level.
I think it would have taken moreaggressive macroeconomic policy.
It would have required the Fedbeing aggressive as it was,
but also announcing a level target.
I think level target goes a long ways.
It's a signal.
In fact, level targeting was somethingreally big in the New Keynesian
(14:00):
literature, as you know, Michael Woodford,Gut Ergensen, and, and for
them it was forward guidance.
Wait for the march,>> Jon Hartley: I guess, right?
Yeah, except just to get things up.
In fact, all of that Princeton School,
Scott Sumner has a paper calledthe Princeton School of Macro.
All of them were thinking about Japan.
Krugman, Sinson, Gotti,Ergensen, Michael Woodford.
They were all there at that time thinkinglong and hard, how do we get out of Japan?
(14:23):
And all of them were very keen abouta permanent increase in the price level,
getting the price level back up.
And many of them would talk about, well,
we need to have a permanentincrease in the monetary base.
Well, the thing is, what is a permanentincrease in the monetary base?
That's effectively.
It's a non Ricardian fiscal regimewhere you promise not to raise taxes in
(14:43):
the future.
It's a policy move where you donot change what you're doing.
What happened after 2008?
There was a commitment toshrink the Fed's balance sheet.
There wasn't the fiscal support.
I think a policy differencecould have been different and
we could have returned it.
But over time, as time goes on you come torealize, okay, that's not going to happen.
We're at a new norm.
You adjust your target.
(15:05):
And that's one reason, Jon, I came up withthis measure called the nominal GDP gap,
or a neutral measure of nominal GDP.
It's based on consensus forecast and itgradually does because if you simply draw
trend lines,at some point they become outdated.
Eventually expectations change, peopleupdate their views, contracts change.
(15:26):
And soyou want to have a flexible understanding.
And I think that's truewith a nominal GDP target.
Eventually potential real GDP will change,and so you gradually,
slowly update your yournominal GDP target.
But again,there normally wouldn't be big swings.
>> Jon Hartley (15:41):
How would you deal with the fact that like,
I guess a GDP is published like 2months after the end of the quarter.
Unlike say, unemployment or CPI,
they're published prettyclose to the reference month.
How would you deal with that fact?
I know some people talked about NGDPfutures markets and things like that.
Like that.
How do you deal with the factthat I guess, you know,
(16:04):
you wouldn't even get NGDP estimatesin a real time kind of fashion.
I mean maybe you want to get the BEA or[INAUDIBLE] start publishing it more
quickly, but I don't know ifhow feasible that would be.
>> David Beckworth (16:16):
Yeah, great question.
Probably the two biggest questionsI get about nominal GDP targeting,
it's that one,the data revisions are huge.
One, they come out, like you said,delayed and secondary, sometimes huge.
And the other one is the potentialworld GDP, that one.
So I think I've addressedthe potential world GDP.
This one I think is probablymore of a challenge.
But there's I thinkseveral responses to it.
(16:38):
You, you mentioned what I thinkwould be the gold standard and
nominal GDP futures market, butthat's nowhere in the works.
I don't want to bank on that.
I want to bank on reality.
What could we actually do?
So what I, what I suggest isagain going to a forecast,
going to consensus forecast orwhere nominal GDP is going.
And even if the measuresare awful over time,
(17:00):
a long consensus forecast is very helpful.
You mentioned Lars Findsen,he says target the inflation forecast.
So it's useful andwe provide some workaround to that.
Again, this nominal GDP gap measureI have created, which also implies
a neutral level nominal gdp, I havea real time measure versus the ex post.
(17:25):
After all the big revisions, even the fiveyear revisions, and they aren't that big,
there would have been some periodswhere there have been differences, but
again the big differences wouldn't havemade much significance in terms of vast
changes in setting the interest rates,things like that,
because I do tie it to a policy rule,a reaction function.
So I would say target the forecastis probably the easiest thing to do,
(17:47):
number one.
Number two though,
I think there's also the ability to relyon many multiple real time measures.
There's, there's monthlyreal time measures.
You could put that togetherwith a forecast of inflation.
This is just one example andI'm sure there's more out there.
But Lars Christensen, who's also anadvocate of nominal GDP targeting, he for
(18:07):
example has tinkered around with thisweekly economic indicator series.
Used to be the New York Fed andI believe the Dallas Fed now publishes it.
And he takes that, andtakes an inflation breakeven forecast and
combines those two together andkind of gets a real time sort
of forecast look at where hethinks the economy is going.
(18:29):
He does it every month.
I mean the Data for the weeklyseries is weekly on the real side.
So there's,I think there's many ways to do that.
There's real time indicatorsyou could use as proxies.
PCE comes out monthly.
That's why some have advocated thatthere's revisions to that as well.
Of course there's the market basedversion of PCE you could rely on.
But I would say, you know,use the real time data sources available.
(18:51):
So number one forecast,number two, more real time.
And the third point I wouldbring up you touched on and
I would say that the data issomewhat endogenous to the target.
If you were to adopt a nominal GDP target,I guarantee the Fed
would find ways spend resourceson getting data that would better
(19:12):
inform it on what's happening to the,the current measure.
Again, there's differentways to measure it.
May I should be very clear about this.
I said nominal GDP ortotal dollar spending.
You could look at final sales, othershave just looking at gross labor income.
Some have looked at pce.
So there's different ways tokind of slice this up but, and
(19:34):
each one may have certain advantagesin terms of data collection.
But I do think the datachallenge is surmountable and
even with the data we have now we,I think there's ways to use it.
We have a framework review coming up,as you know, and
we've written a number of policy briefs.
And my policy brief,
I definitely would love to see the Fedgo all in to a nominal GDP level target.
(19:55):
I know they won't.
So my recommendation has been,many others,
is simply use something like forecastnominal GDP as kind of a cross check.
Use your standard indicator,labor market indicators, things like that.
But also look at forecast of nominal GDP.
Plug them into a reaction function,see what they say.
You were at the American Economicassociation meetings.
(20:18):
Jason Furman was there.
He recently talked about,he's finding his religion again for
monetary policy rules, you could have arule that has nominal GDP forecast in it.
And again you don't have to go all in butyou use it as a cross check.
>> Jon Hartley (20:32):
Interesting.
Yeah, I mean it's interesting, I guess,that the proposal on rules is really using
them more like a guideline ora benchmark or something like that.
That's interesting thought.
I mean, correct me if I'm wrong.
I don't think we have any centralbanks around the world yet
doing NGDP like targeting.
I don't know how close we've come.
I know Bernanke has said some positivethings maybe once or twice in the past.
(20:58):
But I'm just curious, assuming that we'renot adopting NGP targets anytime soon for
maybe some of the challengesthat we've sort of outlined,
I really want to talk about maybejust inflation targeting and
its kind of different variants fora little bit.
You've been doing a lot of really greatwork, along with other scholars that
(21:18):
Mercatus getting prepared forthe next Fed policy framework review.
And I'm curious what your thoughtsare on the flexible average inflation
targeting regime that we've been in fornearly five years or so.
That was sort of really the brainchildof former Fed Vice Chair Rich Clarida.
(21:39):
This was a framework that they putout really right before the big
inflationary spiral thatoccurred in the early 2000s.
In part, I think the flexible averagetargeting was in part responding
to this period where the Fed wasn'table to hit its 2% inflation target for
(21:59):
many years in the 2010s andwas coming in below.
But you know, at some level,I think there's maybe, I don't know,
I feel like a little bit of regretin the sense that, you know,
I think that the fate or flexible averageinflation target was a bit flawed in that,
you know, it wasn't really clear,you know,
if we were going to take some average oversome period of time, it wasn't clear,
(22:23):
you know, what period of time oryears we were averaging over.
You know, the Fed generally,historically has followed, you know,
a year over year orone year look back window.
Right.
But how many years back would it be?
How flexible would it be?
So I think we're all sold, or at least I'msold on inflation targeting in general.
(22:45):
We could debate what exactlythe right target should be.2% or.
Paul Volcker, for example, was pushing for
a 0% inflation target the rest of hislife after leaving the Fed chair or
leading the Fed board,as did other central bankers.
In fact, in the early 90s,John Crow at the Bank of Canada argued for
(23:08):
0% inflation target too.
But in terms of, you know, the F andthe a, you know, averaging,
thinking about levels versus rates ofchange and where do you fall on all that?
If we can't have an NGDP target, we haveto stick to inflation at some level.
How do you think about that?
Do you think that the Fed's flexibleaverage inflation targeting regime's
(23:30):
been successful or do you think thatgoing forward the Fed will abandon it and
so will monetary policy scholars?
>> David Beckworth (23:38):
Well, based on what Jay Powell said to Catherine Rampel at
The Washington Post back in November,he had a sitdown with her and
she asked him about the review.
And he said his base case scenariois a reaction function, ie,
a Taylor rule that does not promiseto make up for past misses or
promise to overshoot Shoot the targetif they've undershot, which I find
(24:01):
a little troubling because that to merules out makeup policy altogether.
And I guess the one thing Iwould encourage FOMC members,
if they're listening to this, is we wannamaintain, hold on to makeup policy.
I do think fate was not the best wayto do it, but fate did introduce it.
I will say this,
FAIT I think is an historic seachange in terms of monetary policy.
(24:24):
It's the first time a central bank hastalked about targeting something like
a price level.
Now, I should take that back.
I believe the Reichsbank in Sweden didprice level targeting explicitly for
a while, 1930s, maybe 1940s.
It's a while back.
But modern central banking,the Federal Reserve and
FAIT is the first central bank toincorporate several decades of research
(24:48):
literature about zero lower bound aboutmakeup policy board guidance in terms of
a framework that I think you could alsocall temporary price level targeting.
The Bernanke, a version of it,Rich Claire to call it a version of it.
So I think it's a step, it's progress.
I would do thingsa little bit differently.
And my worry is that they're gonnacompletely throw the baby out with
(25:10):
the bath water.
At least that's the signal they've sent.
And, and every place I've been,I've heard FOMC members say, yeah,
bait was designed fora different period, which is true.
There's been several conferences on thisat Hoover, multiple events at Brookings.
They've talked about this,papers have been written.
In fact, the paper that I wrote up,
(25:31):
I kinda summarized what I thought was theconsensus from all these different talks.
But there were a numberof critiques of FAIT.
And maybe we should step back and
just remind our listeners whatactually happened in fate.
So prior to FAIT,flexible average inflation targeting,
the Federal Reserve and FOMC had FAITfit flexible inflation targeting,
which was officially introduced in 2012.
(25:52):
So there was a consensus statement.
In that consensus statement,it outlined 2% PCE inflation.
That statement, though, also had in itthe other part of the dual mandate,
maximum employment.
And it talked about deviations,no numbers, but deviations.
So it had both sides of the dual mandate.
So you can call it a flexible inflationtarget because it's aiming for
(26:14):
2% inflation.
But it also has its eye on avoidingbusiness cycles, full employment.
We go to 20.
>> Jon Hartley (26:20):
It was the first time that the Fed had ever actually announced that
it was targeting inflation.
Yes, it was very late to the game manyof the other big advanced economy
central banks hadannounced this by the 90s.
2012 was actually relatively pretty latecompared to the other central banks.
>> David Beckworth (26:37):
Yeah, and to be fair to the Fed though they were implicitly
doing something close to two by the earlyto mid-90s least some studies have
found that they were there,but not officially there.
Like it took Ben Bernanke coming onboard and really talking them into it.
But there, there are discussions in thetranscripts back in the 90s about should
we go to an official target.
But you're right, 2012, but
(26:58):
that consensus statement becomeskind of like a constitution for it.
And this is again another reason why I'ma little worried about them completely
throwing out the makeup part.
So 2020, they changed it quiteradically to include there's gonna
be makeup policy on the inflationtarget if it's below, not if above.
So if you're below, you make up frombelow and then once you go above,
(27:20):
it's just regular flexibleinflation targeting.
So that's very much in the spirit ofBernanke's temporary price level target.
You try to maintain the price level path,but you only do so if you're below.
If you're above,you let bygones be bygones.
The other big change was onthe maximum employment part.
Instead of having deviationswould be something the FOMC
would be concerned about.
(27:41):
They then said shortfalls.
So only if the economy was, was weak orcold relative to potential would
they respond if it wasoverheating off the table.
At least according tothe language of FAIT.
Of course, the Federal Reserve abandonedthose principles in 2022 [LAUGH] when
labor markets were clearly overheating andthey started raising rates.
(28:02):
So the FAIT introducedthose two asymmetries.
They would only do makeuppolicy from below 2% and
they would only respond toshortfalls from maximum plum.
That was a big sea change.
Now, the challenges in thoseone I think a fair critique.
A lot of people, Gotti Ergenson andDon Kohn have a paper,
a number of people havewritten along this.
(28:23):
The Roamers had a paper recently and inone sense fate was fighting the last war,
the last decade of zero lower bound.
You want a framework that can handle anysituation, not just the low inflation.
That's, that's fair, totally fair.
Also there's, there's concerns aboutwhat does it mean to be makeup policy
doing makeup, how all, how high, howlong above before we go back to two what
(28:47):
is a shortfall andhow much do you respond.
So there's a lot of uncertainty andthere wasn't much clarity on that.
There's also some concern that this wasputting more weight on maximum employment.
Both the roamers and again Gotti ErgensenDon Kohn said FAIT effectively put more
weight on maximum employment thanthe priceability part of the dual mandate.
(29:09):
So it added an inflationary bias, whichis fine if you're in a zero lower bound
world, but if you're outside of that,you don't want that.
So there's definitely room to recalibratethis, make it more effective.
But I do worry if you completely throwout again the baby with the bath water,
I'll make a policy thatthey'll have gone too far.
So what I recommend they do is use nominalGDP level targeting as a benchmark and
(29:32):
any incremental change you make,have it move in that direction again.
They're not going to go all the way there.
But so here's what I would recommend.
I would recommend gettingrid of the shortfalls part,
go back to deviation soit's both above and below.
And there's been some other great work,Michael Kiel.
>> Jon Hartley (29:47):
A symmetric target is one thing that you want.
>> David Beckworth (29:48):
Yes, yes, a symmetric target, Michael at least on the,
on the maximum employment side,Michael Kiel did some work where
he showed using models that if yourespond systematically to shortfalls,
ironically you make more shortfalls inthe future because you're kind of not
responding to the overheating and you canactually exacerbate the business cycle.
(30:09):
If you respond symmetrically,then things can actually be better.
On the inflation side, I don't thinkit's great that they respond from below
only for communication purposes, butI do get why they would do that and
I would recommend at this point to keep,keep that part.
(30:30):
And let me go back to the original again,motivation idea behind this as I
understand, and that's Brandon Bernanke'stemporary price level target.
>> Jon Hartley (30:39):
Which is metric target to some degree.
>> David Beckworth (30:42):
Yeah, well, it's very similar to FAIT.
It just doesn't have all the languageabout the maximum employment.
It also says if you're below 2% belowyour target, you run the economy hot.
You actually have inflation above your 2%until the price level gets back on its
original trend path, but you don't.
>> Jon Hartley (30:58):
[INAUDIBLE] the paper for those that are listening,
this is a Brookings paper thatBen Bernanke wrote in the late 2010s.
It was very influential prior to the Fed.
>> David Beckworth (31:05):
Yeah.
[INAUDIBLE]>> David Beckworth: And
the reason he gave forwhy you would only do it from below,
which is what fate is is because he said,look,
what if you have inflation above 2% andit's driven by negative supply shocks?
So the economy is contracting already,inflation is going up.
Why would you want to undershoot forseveral peers?
(31:27):
You'd add more,
more harm to the economy on top ofthe negative supply shock already.
And that I agree with that.
And that's exactly why you would want todo something like a nominal GDP target.
I didn't mention this earlier,but one of the big reasons for
nominal GDP targeting is it's a wayto work around supply shocks.
We don't know in real time whetherinflation is caused by demand or supply.
(31:48):
We maybe we can figure out,look at the news, but it's really hard,
it's not clear in the data.
And we know 21, 22, all this talk about isthis transitory inflation or permanent?
That's another way of saying is this.
Driven by temporaryidiosyncratic supply shocks or
just something more permanent andwe simply don't know.
So instead of trying to play God andfigure that out,
(32:09):
look at the total demand in the economy.
Keep total demand, total spending stableand those shocks will work themselves out.
And if, and if you're way above the trendpath, whatever your target may be for
total spending,then maybe you have some issues.
So the supply shock wasa very reason Bernanke had
a below asymmetric priceprice level target.
(32:30):
And I say look, that's great,why don't you go all the way?
If you go all the way,take the logic to its limit,
you end up with the nominal GDPlevel target you mentioned.
Bernanke endorsed it.
Christina Romer endorsed itin the 2011 New York Times.
She even had an op Ed saidBen Bernanke needs his Volcker moment.
And in the op Ed she saidhe needs to go all in and
(32:52):
adopt a nominal GP level target.
Michael Woodford A lot ofpeople have endorsed this for
a zero lower bound world.
There's other arguments more recently thatwe could talk about if you want for, for
doing that as well.
But back to fate.
I, I just hope they don't completely throwout everything and go back to fit flexible
inflation target because I think there'ssome things we want to keep interesting.
>> Jon Hartley (33:13):
Well, I know I, I feel like the Fed certainly, I think before any
kind of framework, any meaningfulframework change I feel like has
to sort of get inflation back to 2% andsort of to kind of ensure its
credibility before really thinkingtoo much about maybe further changes.
(33:34):
And I know there's some people out therewho advocate for a 3% inflation target.
But I think getting inflationback to 2% in a sustainable
fashion is kind of first andforemost, my last sort of question or
sets of questions here isreally about Fed plumbing.
And you've written and spoken a lotabout this through your podcasts and
(34:00):
this gets back to the kind ofabundant reserve system and
how much 2008 andthe first rounds of quantitative
easing really changed howthe plumbing around the Fed and
the short term money markets really work.
So one thing that's happened iswe used to be in the system,
(34:26):
some might call reserve neutrality ora scarce reserve system.
And that was a system where you do openmarket operations that would move the Fed
funds market andthat's all the Fed needed to do.
But since 2008, because the moneysupplies has been shifted so
(34:46):
far out to the right or we have what'scalled an abundant reserve system.
Now the Fed,in order to raise interest rates,
has to actually use price floors, sothings like interest on excess reserves,
the reverse repo rates and so forth.
And that's how it's able to raiseinterest rates without unwinding
(35:08):
all the quantitative easingthat it's done in the past.
And so the Fed's been in the systemwhere it's now been able to both
adjust interest rates while alsohaving a Fed balance sheet that
has trillions of dollars of long termassets on it, lots of quantitative easing.
(35:29):
Part of this also changesthe system of from those
that are familiar corridors andfloors, and
this kind of gets back tothe whole reverse repo IOE up
versus IBeer rates being part of,say an abundant reserve system.
(35:50):
Can you explain us, what the differencebetween corridors and floors are and
can you explain sort of what's going onnow and that with Fed or sort of with
various central banks winding down ortrying to wind down their balance sheets
now that we're sort of in better times nowand have been trying to escape inflation.
Can you explain what the shift that'skind of going on now where central banks
(36:14):
are really trying to get away from theabundant reserve supply driven system to
some degree, and maybe with the exceptionof the Fed trying to incrementally get
back to a demand driven system andmaybe not fully a quarter system.
But can you explain what all thismeans and where things are at and
where things you think are going?
>> David Beckworth (36:36):
Yeah.
So you've covered a lot of ground there.
Prior to 2008 in the US and in many placesaround the world for advanced economies,
most central banks were operating onsome version of a corridor system.
So it's also called scarce reserve system.
Bill Nelson calls ita necessary reserve system.
But very few reserves were actually inthis system, at least compared to today.
(36:59):
Very few reserves in the systemalso compared to the currency.
So in terms of central bank liabilities ismostly currency, a little bit of reserves.
And the interest rate thatwas set on those reserves was
determined in some interbank market.
Banks would lend their excessreserves to each other.
And in the case of the US it wasthe federal funds market and
(37:20):
all that the Fed would do, the Fed wouldadjust the size of its balance sheet,
inject or pull out reserves liabilities,and that would move the supply up and
down a downward sloping demand curve forreserves.
So if the Fed wanted to target 5% interestrates, it would adjust supply and
then you would be on that.
And it required very few reserves,it was scarce.
(37:41):
As you said, at the other extreme,where we are today,
you have a floor system where youincrease the supply of reserves so
much you get to a part of the demandcurve for reserves that's flat.
And when you get to that point,no matter how many reserves you increase,
even decrease some,it's gonna be at that level.
(38:02):
And typically that kicks in duringa zero lower bound environment.
But when you add administrative rates,you mentioned interest on reserves,
you also mentioned overnight reverse repo.
That's kind of likethe leaky floor system.
Sometimes market rates don't stayat that interest in reserve.
So the Fed had introduced another way tomaybe clog that floor overnight reserves.
(38:24):
So the Fed can preventrisk from going down.
Now on the top, it also has interestrates from it going too high.
It has a discount window rates, it hasthe also the standard repo facility.
So the Fed has these facilitiesthat try to keep rates within it.
And given that their administrative rates,it's in a very narrow window.
And if in a perfect world wedidn't have market frictions,
(38:47):
it would be like a straight line.
But it's not quite that way.
There are arguments for both systems.
So the scarce reserve system,you have a very small balance sheet.
So the financial footprint ofthe Federal Reserve is much less.
You also have a close link betweenthe size of the balance sheet and
monetary policy itself.
So if you wanted the Fed to again changepolicy, you would have to increase or
(39:10):
decrease reserve,change its balance sheet.
Today that's not the case, you noted this.
The Fed can simply changean administrative rate without changing
the size of its balance sheet.
Now for advocates of the floor system,that's a big deal because then the Fed can
inject liquidity into say,a strained banking system without
affecting the stance of monetarypolicy via interest rates.
(39:32):
For advocates of a corridor system, they'dsay that might be a bad thing because if
you have a system like that,it becomes a temptation to politicians.
So you're telling me, Fed, that youcan keep interest rates pegged and
increase your balance sheet, but
why don't you buy up a bunch of bonds tobuild a wall or to fund a green New Deal?
And so the balance sheet, if it lookslike a free lunch, it's really not.
(39:52):
But as you know, is a good economist, but
to many politicians itbecomes a free lunch.
So there's arguments for and against.
There's also questions of what's easy.
Advocates of the floor system said thiswill be super easy because we're using
administrative rates.
Hasn't turned out soeasy as many expected.
Also, when you have a corridorscarce reserve system,
(40:14):
it relies much more onbanks to fund each other.
And we have largely lost that in the US.
The federal funds marketis a shell of itself.
And this is a nice transition tothe second part of your question.
Other central banks around the worldare actually gradually moving back.
They're a long ways from a corridorsystem, but they're gradually moving away
from supply driven kind of ample,abundant reserve system.
(40:36):
And their motivation has been twofold.
Number one, there's been a lot of losseson central bank balance sheets and so
the fiscal authorities, parliaments,they're worried about that.
But secondly, andparticularly in the case of ECB,
because I talked to Isabel Schnabelon the podcast about this,
their motivation for going back wasto resurrect the overnight unsecured
(40:57):
interbank market where banks wouldlend to each other unsecured.
Well, if you're going to lend unsecured,
you better know yourcounterparty really well.
So there's price discovery, there's,there's learning about new risk that are,
that currently is missing.
You don't find this in any other marketand they, they want to resurrect that.
Now again, we're not probably going togo to balance sheets the size they were
(41:17):
before 2008 butin my mind that's a great step.
We're going back,we're getting the markets more involved.
Banks rely on each other less.
On the central bank forliquidity in the US it hasn't happened,
I think in part because of someof the financial regulations.
I think there's just some complacency.
I think you get the right people atthe Fed though, things could change.
(41:38):
And I think ultimatelyyou alluded to earlier,
we were slow to adopt inflation targeting.
The rest of the worldwas on that bandwagon.
I think eventually we'll, we'll have tocome around as well just because the cost
of maintaining large balance sheets arejust going to continue to grow over time.
And I think doing more moving in directionof something between a floor and
(42:00):
a scarce reserve system,a corridor system might be useful.
The central bank of Norway,the Norges Bank,
it has something calleda tiered reserve system.
Loretta Mester has advocated somethinglike this where some of the reserves
are remunerated.
They do get something at the bank,but many of them do not.
And so it's kind of a compromise.
I think that's where the world is going,and I suspect with enough time,
(42:24):
the Fed will be there, too.
>> Jon Hartley (42:25):
Interesting.
I mean, it's fascinating.
We've been in this period for almost20 years of era of big balance sheets,
big central bank balance sheets, lots ofquantitative easing, abundant reserves.
It's interesting to see now centralbanks really sort of trying to
think about some sort of an exit strategy,the extent that it's possible.
(42:48):
And I still don't think we're necessarilygetting back to where we were
prior to the global financialcrisis anytime soon.
But it's very interestingto hear about these sort
of alternatives that other centralbanks around the world are doing.
A real honor to have you on, David,and hear about your career and ideas.
I know there's somuch we could talk about and
(43:08):
I would love to have youon again at some point.
I really want to thank you for joining usand really for the great service that I
think you've done for the economics andmacroeconomics and finance community with
all the wonderful podcasts and writingthat you've been doing over the years.
>> David Beckworth (43:24):
Well, thank you for having me on your program.
>> Jon Hartley (43:26):
This is The Capitalism and Freedom in the 21st Century Podcast,
an official podcast forthe Hoover Economic Policy Working Group,
where we talk about economics,markets, and public policy.
I'm Jon Hartley, your host.
Thanks so much for joining us.
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Introducing… Aubrey O’Day Diddy’s former protege, television personality, platinum selling music artist, Danity Kane alum Aubrey O’Day joins veteran journalists Amy Robach and TJ Holmes to provide a unique perspective on the trial that has captivated the attention of the nation. Join them throughout the trial as they discuss, debate, and dissect every detail, every aspect of the proceedings. Aubrey will offer her opinions and expertise, as only she is qualified to do given her first-hand knowledge. From her days on Making the Band, as she emerged as the breakout star, the truth of the situation would be the opposite of the glitz and glamour. Listen throughout every minute of the trial, for this exclusive coverage. Amy Robach and TJ Holmes present Aubrey O’Day, Covering the Diddy Trial, an iHeartRadio podcast.
Good Hang with Amy Poehler
Come hang with Amy Poehler. Each week on her podcast, she'll welcome celebrities and fun people to her studio. They'll share stories about their careers, mutual friends, shared enthusiasms, and most importantly, what's been making them laugh. This podcast is not about trying to make you better or giving advice. Amy just wants to have a good time.