to the very founding of our country where you can now go see Hamilton if you can afford a ticket and uh and see monetary policy set to rap music which I think is a first but probably not theonly example of this um what's the big challenges what do you see is the challenges now that you face
Will we not go bankrupt? monetary policy -- fiscal policy the same way we have confiscated fiscal policy two generations ago, by creating -- it's okay.
come to an end when this deleveraging subsides I believe that the fed's monetary policy and the government fiscal stimulus will take effect and it will causeinflation the dollar is likely to stall it could even plummet um you have to look at it this
up a bubble uh in the 1920s for the same reason they blew up uh this time around. Monetary policy was too easy. They kept interest rates too low. And we had a stock market bubble. the bubbleburst and Herbert Hoover rather
very wealthy, but typically the tightness of money because during that spot, there's inflation pressures and central banks decide that they want to tighten monetary policy and so on. It becomes that the amount of money that I can get by owning that debt at the higher interest rates is greater than the amount of money I could get on my
I was given a subgovernor for monetary policy . My PhD is on monetary policy and public debt management. And my friends, as you mentioned, at the IMF were very worried.
One way would have been to let one or two extra banks collapse. and that monetary policy was more closely connected to the real economy.
raise interest rates it kind of cool the economy down slow it to a more sustainable Pace economy's weak like in a recession you lower interest rates and try to stimulate spending monetary policy is very simple it causes some people to go from being a saver to being a spender it's you know very Keynesian in that way that with with low interest rates you're willing to spend a little
And so we think this is the first study that's looked at-- a lot of people have looked at simple rules in specific domains. So in monetary policy , for instance, there's a rich body of research about the role of simple rules. And social biology-- rich body of research about the role of simple rules.
those who had jobs would have maintained their higher wages, but at the cost of greater unemployment to a larger We've got expansionary monetary policy .
Will we not go bankrupt? If politicians had monetary policy at their disposal what would be the result?
Will we not go bankrupt? So that's the monetary policy story.
jobs for people on farms that paid all that much. If you expand monetary policy at the same time you will have an expansive fiscal policy.
- Yeah, absolutely. Friedman believed in being able to say, "I was wrong." And there are some things he said he was wrong about. We'll delve more into monetarism and monetary policy , but he was able to talk about the ways his ideas hadn't mapped onto the world the way he thought they would. He does a really interesting interview at the end of his life where he's beginning to voice some doubts about globalization, which he was sort of a prophet of globalization,
So I was very excited. I was given a subgovernor for monetary policy . My PhD is on monetary policy and public debt management.
market it's not that we're trying to boost the stock market it's that that's just the way monetary policy Works what we're trying to do is boost the economy create more jobs but the way monetary policy works is by basically easy monetary policy is going to move up asset prices it's going to all else equal push down the value of the dollar and all you know and bring down mortgage
reconcile these two things is should the uh employment to population ratio be a center of the debates in monetary policy uh so the unemployment rate the u3 unemployment rate the standard one uh is
does this sound familiar in current policy debates?-- debasing its currency, pursuing policies that favored the present over the future, including fiscal policy and what would be the equivalent of monetary policy . Rome's understretch over a period of time led to its rot far more than its military adventure.
Just a little over 10 years ago, 2001, the US had a large surplus. You know the details of how monetary policy is conducted, is buying and selling national debt.
So we will spend our way out of the crisis. And the same story in terms of monetary policy . What got us into trouble?
around there making sure that they're safe and sound and following the rules but most importantly we set uh doing our best to make sure they're safe and sound and following the world uh the um going back to monetary policy I mean that's the biggest responsibility and for for people around in the last 10 years it's it's or 15 20
responsibility and for for people around in the last 10 years it's it's or 15 20 years maybe it's not clear you know why monetary policy is is so important but if you go back in history further you go back to whether it's the Great Depression you go back back to the 1970s where monetary policy uh you know I
System so my um uh in the end uh obviously they're the ones have oversight over our operations in San Francisco but at the same time when we get together for monetary policy meetings we all come together as uh you know equal Representatives uh participating in the discussion and voting obviously with our chair being the the leader of the organization but
rate you're you know you're willing to pay more for houses and I know this could be a question that comes up I mean this is the one of the ways that monetary policy Works low interest rates do Boost asset prices they make house prices higher they make commercial real estate prices higher they make the stock market higher that's one of the ways that monetary policy does work with negative rate so you're just pushing
Will we not go bankrupt? Debt. The sin of monetary policy is hyperinflation, the sin of fiscal policy is debt.
Will we not go bankrupt? And I think this autopilot -- we already have this autopilot in monetary policy , by the way, Milton Friedman invented it, and that is, money supply should mimic the development
negative interest rates as seems more appropriate in this environment what's uh what's the story there I mean would that how does that benefit the ordinary person right so you know monetary policy usually works that when the economy is strong you know growth is strong unemployment is low inflation's high you
Thanks for that. So usually when people ask me to speak, they're usually very, very specific about what they want. It's usually things like, can you explain monetary policy and inflation? Can you talk to me about the Volcker rule?
Will we not go bankrupt? If we -- let's imagine how the crises would look like if we had fiscal -- monetary policy .
I went back to the IMF in August 2016. And then in January 2018, while I am on mission in Jordan for monetary policy and financial stability-- and this is also another funny story.
years maybe it's not clear you know why monetary policy is is so important but if you go back in history further you go back to whether it's the Great Depression you go back back to the 1970s where monetary policy uh you know I would argue did a pretty poor j job of containing inflation uh in terms of maintaining price stability uh those
this is the one of the ways that monetary policy Works low interest rates do Boost asset prices they make house prices higher they make commercial real estate prices higher they make the stock market higher that's one of the ways that monetary policy does work with negative rate so you're just pushing that you know even harder on on um on that mechanism a lot of people say oh it's the FED trying to boost the stock
that you know even harder on on um on that mechanism a lot of people say oh it's the FED trying to boost the stock market it's not that we're trying to boost the stock market it's that that's just the way monetary policy Works what we're trying to do is boost the economy create more jobs but the way monetary policy works is by basically easy monetary policy is going to move up
exactly just right I mean I don't know I don't think anyone knows um and the second issue is what are the costs of Le of Leaning itself uh if you know the the problem that we face in monetary policy is say that you thought that uh we're in the housing market is overvalued um and
reconcile these two things is should the uh employment to population ratio be a to do it is it lifestyle choices is it um is it a good thing is it a bad thing from a monetary policy point of view let
Similarly, when the level of unemployment increased in Nevada because construction workers were unemployed following the collapse of the real estate She said, who controls interest rates, who controls monetary policy in Europe, controls the politics of Europe.
So in the story of the Sirens, it's a story of temptation. Well, it's certainly the case that current US monetary policy has kept interest rates very low.
Just a little over 10 years ago, 2001, the US had a large surplus. He was worried we were gonna pay back the entire national debt and that would be very hard for him to conduct monetary policy with no national debt.
Will we not go bankrupt? One is fiscal policy, and the other one is monetary policy .
Will we not go bankrupt? such, but if we go with the formula -- >>TOMAS: We already have that in monetary policy .
jobs for people on farms that paid all that much. And unless we restore growth and the easiest way of restoring growth is through an expansive fiscal and monetary policy , we're going to make that long term debt even worse.
jobs for people on farms that paid all that much. But -- here's the big b-u-t, the big but is that fiscal and monetary policy will only carry
So I think there is a kind of -- this kind of shakes up the intellectual underpinnings that influenced monetary policy in the past and they are in the process of rethinking
Right. Right. But trying to connect tariffs or in an international monetary policy to, you know, uh higher prices uh you know,
OK. I guarantee it. So anyway I did my New Year's Eve in Siwa, and then went to Jordan to lead this mission on monetary policy and financial stability. And from Siwa you take salt. It's for detoxing.
And now he's running for president. In the meantime, Brazil, during that period-- and this is just where politics meets monetary policy -- has basically reduced its rates from-- this is a completely separate graph, this doesn't count on that graph-- reduced their rates from 14.5% to 6.5% in a very short period of time.
has higher rates than Brazil. So there was a lot of shakeout, as well, from a monetary policy perspective, where government bonds are trading, where stocks are trading, and who's shifting in the power relationships of central banks and also the governments.
from an economic perspective, and also its relationships with other countries. And one of the reasons it doesn't get talked about is that it chose to criticize, very vocally, the monetary policy of the United States because of this whole creation of money policy.
So one night Arthur Laffer goes out to a bar with two senior aides to President Ford, they go to a bar in Washington D.C. and they start talking about taxation and monetary policy .
Will we not go bankrupt? It is okay to run a deficit in crises, and it is okay to run low interest rate monetary policy in crises.