Russ Roberts's Federal Reserve Time Machine
By Amy Willis
This EconTalk episode was recorded before a live audience at the Cato Institute in conjunction with its Center for Monetary and Financial Alternatives. Guest David Beckworth, a Cato adjunct scholar and professor at Western Kentucky University, offered his perspective on the causes of the Great Recession and the Federal Reserve’s role in it.
1. What was the Federal Reserve’s biggest mistake in its response to the 2008 financial crisis, according to Beckworth? What evidence does he provide for his claim?2. How much control does the Federal Reserve really have over interest rates? In this 2013 Feature Article, Jeffrey Rogers Hummel calls such control a “myth.” Compare Hummel’s view to Beckworth’s?
3. What are the advantages of a rule-based approach to monetary policy? Why is a rule-based policy so unlikely to be agreed upon, according to Roberts and Beckworth? If you were to choose one such rule, which would it be, and why?
4. Roberts presses throughout that as much as he wants to agree with Beckworth’s analysis, it is an ex post narrative. Why does Roberts find this troublesome? What additional evidence does he suggest that might make Beckworth’s analysis more convincing?