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A New-Old Critique of Monetary Policy

Summary:
Today, John Cochrane, Mickey Levy, Kevin Warsh & I spoke at a roundtable discussion on the Fed’s monetary policy at the Hoover Economic Policy Working Group. Cochrane talked about the fiscal side, Levy about the best inflation measures, Warsh about regime change, and I talked about the big deviations in policy from standard monetary policy rules. Many of the speakers had written about these issues for a year or so, but bringing them together revealed different perspective but with a common theme: the main concern was the high inflation rate induced by the new policy actions, whether the super low policy interest rate, the high money growth, or the big balance sheet expansion. Some talked about how the Fed got into this difficult situation, and that brought back old memories

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Today, John Cochrane, Mickey Levy, Kevin Warsh & I spoke at a roundtable discussion on the Fed’s monetary policy at the Hoover Economic Policy Working Group. Cochrane talked about the fiscal side, Levy about the best inflation measures, Warsh about regime change, and I talked about the big deviations in policy from standard monetary policy rules. Many of the speakers had written about these issues for a year or so, but bringing them together revealed different perspective but with a common theme: the main concern was the high inflation rate induced by the new policy actions, whether the super low policy interest rate, the high money growth, or the big balance sheet expansion.

Some talked about how the Fed got into this difficult situation, and that brought back old memories of the 1970s where the critique was similar. All agreed that the Fed was now behind the curve, and the question was when and how rapidly to get back on track. The event had many commentators and guests–including monetary experts alike Mervyn King, Andy Levin, David Papell, and Robert Heller, who also spoke out on the same theme.

The whole Zoom event was video-recorded, and can be found here: https://www.hoover.org/events/roundtable-economic-policy-john-cochrane-mickey-levy-kevin-warsh-and-john-taylor along with the list of participants and slide presentations, which contain many useful charts and background references.

John Taylor
John B. Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University. He formerly served as the Director of the Stanford Institute for Economic Policy Research where he is currently a Senior Fellow. He is also the George P. Shultz Senior Fellow in Economics at the Hoover Institution.

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