柏南克談聯準會：二十一世紀貨幣政策

by Ben S. Bernanke, 柏南克, 洪慧芳 (Translator)

你不是不懂經濟，而是沒弄懂危機中的聯準會！
張忠謀、陳南光等重量級人士 聯袂推薦

2022年諾貝爾經濟學獎得主、
聯準會前主席柏南克，探討二十一世紀貨幣政策 最新力作！
＼＼解答全球最受關注的央行動向與決策／／


自上世紀大通膨，到本世紀金融危機與新冠疫情，
全世界都在看，聯準會的下一步會怎麼做？
但不斷跨越政策紅線的聯準會，真的還有能力穩定經濟嗎？

柏南克從歷史的視角檢視聯準會，
從1960年代寫起，期間聯準會主席從馬丁嬗遞到鮑爾，
中間歷經伏克爾、葛林斯潘、葉倫，以及柏南克等人，
政策方針、工具與操作手法已顯著改變。

這些改變深受這段時期的通膨走勢變化、自然利率長期下降，以及金融不穩定風險增加的影響。
柏南克以其諾貝爾獎學者與聯準會前主席身分，討論這期間經濟與金融上的重大議題，以及聯準會如何因應這些挑戰。

聯準會在危機中扮演的角色已一再擴大，不斷跨越過去被視為禁忌的紅線，
由最後貸款者轉為最後購買者（buyer of last resort），並充當信用配置者（credit allocator）。
央行除了承擔部分財政當局的紓困責任，還兼任類似於商業銀行的角色。

＼＼美元是美國的貨幣，卻成了全世界的大問題？／／

《柏南克談聯準會》說明聯準會的背景與演變，也推測了它的未來。柏南克以全新的觀點，帶領讀者深入聯準會一窺堂奧，並說明它做了什麼及其背後的邏輯。他指出經濟的改變如何推動聯準會的創新，也列出聯準會面臨的新挑戰，包括通膨再現、加密貨幣、金融不穩定的風險增加，以及聯準會的獨立性所受到的威脅。

本書也揭露聯準會發布政策的決策過程，以及聯準會主事者的性格與理念。如果想推測聯準會的下一步，就必須了解危機中的聯準會。

Genres: Economics, History, Nonfiction, Finance, Business, Politics, Money

466 pages, Kindle Edition

First published May 17, 2022

About the author

Ben S. Bernanke served as chairman of the Federal Reserve from 2006 to 2014. He was named Time magazine’s Person of the Year in 2009 and was a professor of economics at Princeton University prior to his career in public service.

Reviews

[Henk · Rating 4 out of 5]

From the newly minted Nobel Prize in Economics winner 2022!
A fascinating peek behind the curtains of one of the most influential institutions in recent modern history. I enjoyed the insights in policy, and the many considerations this involves. Definitely a book for anyone with a firm interest in economics
Good communication makes for effective policymaking

A good appetiser for any macro economic courses I'll follow later in the next two years.
Ben S. Bernanke describes the history of the Federal Reserve and the extraordinary measures taken in response to the financial crisis of 2008 and the COVID-19 pandemic of 2021. This also sheds a light on how central banks can use policy in the future to address challenges.

Goal independence versus policy independence is a first topic touched upon in 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19, on how politicians can use the independence of the central bank as a mechanic to take unpopular decisions.
Political appointees dominate, but these can’t be sacked for policy disagreements by the government.

Great inflation
The historic perspective starts post WWII, with 1952 till 1965 having an inflation which only averaged 1.3%. Between 1979-1980 inflation was at 13%. In our current times this is definitely interesting, and Bernanke describes the forces that contributed to this inflation.

1960’s Vietnam war spending and the introduction of Medicaid and Medicare increased government spending and demand. In 1972 the government initiated price freezes, which for two year were successful in reducing inflation, but which also dulled the market response to high prices
The difference, as also explained in this book, between supply and demand shocks seems hardly that defendable as we now see a price/wage spiral starting, based on supply shocks. Still it is interesting that the Philips curve of demand and prices interacting, leading to dual mandate of maximum employment (around 3%-4% unemployment being accepted and seen as “normal”) and stable prices, only emerged in the 1970's.

Also interesting is how fiscal and monetary policy being used in election years, and inflation being influenced by expectations of inflation. Politics hence influences monetary policies.
The dual mandate also introduces a battle between full employment and taming inflation, or between hawks and doves. Central bank president Volcker trying to control money supply instead of just using interest rates to enforce policies and control inflation.

Forward guidance and greater transparency (Good communication makes for effective policymaking) about expected interest rate developments and the view of the economy and risks being instrumental to get the market to respond to the desired goals of the central bank. Also a concept of probabilistic forecasting and easing more than the average scenario would require as an insurance against tail negative risks is interesting.

2008 financial crisis and beyond
Only 50% of subprime loans being originated by companies under oversight of state regulator instead of the Fed.

How is the risk of central banks buying government bonds as government financing not mentioned?
Independence of central banks as a method to take political unpopular measures good for the long term economy is something Bernanke mentions.

Trade war of Trump costing $50billion in subsidies and being passed on to US consumers
Trump trying to tweet policies of the Fed

USD 2.4trillion asset purchases to prop up the American economy during COVID-19.

The Fed owning 37% of treasuries at the high mark of QE.
0.63% impact on interest rates of EU countries from QE by ECB.

Long term rate cuts being much more effective as a stimulant than short term rate adjustments since this targets mortgage and durable goods investments, which underpin the general economy and consumer confidence.

Estimated 1.25% lower unemployment and 0.6% higher inflation in 2015 due to QE

Neutral estimated interest rate 2.5% before inflation and QE, with an approximately 3.0% additional stimulus margin being available through extraordinary measures.

Overal an interesting, if technical book on how central banks work and impact the financial markets. The general goals are good, and the policies seem well thought out, but the amounts involved are staggering so no wonder many feel that the new directions central banks have moved into are uncomfortable. Bernanke tries to explain the rationale of measures and reflections on the efficacy of policies, which is commendable.

[Cory Knipp · Rating 5 out of 5]

There is no better economist to learn monetary policy from than Ben Bernanke. As Chair of the Federal Reserve during the Financial Crisis and its aftermath, he had to experiment with new tools to recover an economy experiencing the worst recession in nearly a century. The same tools that had to be used in response to the COVID pandemic. However, these new tools will be used as our economy shifts to slower growth where inflation will continue to slow in the long term. As a result, his impact on the Fed will be felt for generations.

Ben Bernanke takes you through the history of the Fed starting with the precursors to the Great Inflation era of the 60s and 70s. Here he showed how political pressure prevented the fed from properly taming inflation for decades. This led to unanchored inflation expectations (meaning people just expected high inflation every year), making the Fed's job of maintaining price stability much more difficult. However, when Paul Volker became Fed Chair, he was willing to do the politically unpopular in order to restore price stability to our economy. By raising interest rates to extremely high levels and causing a deep recession. Volker was able to bring inflation down to the normal levels we often expect today, but only by forcing the economy to go through a period of high unemployment.

Volker's historic hawkish behavior was a turning point at the Fed. Because Volker was able to tame inflation, this gave the Fed credibility in the market, which anchored inflation expectations for the next 30 years. Also, Volker's interest rate hikes (which caused high unemployment and lower inflation) gave credence to the "Phillips Curve". The "Phillip's Curve" hypothesized a relationship between employment and inflation. As unemployment came closer to the natural rate of unemployment (u*) then inflation would then rise. If unemployment rose (farther from u*) then inflation would fall. Volker tested this by creating mass unemployment, which he hoped would reduce inflation.

Alan Greenspan then presided over the Fed during a time of great price stability. Greenspan was able to grow the economy while keeping inflation at bay. And with the exception of the 2000 tech bubble was able to keep employment relatively stable. However, while Chair of the Fed, Greenspan did not detect how the financial sector was changing and leaving the regulatory space of the Fed and other financial regulators. This obviously would have consequences that led to the Financial Crisis.

Then we enter Bernanke's term where he has to use emergency powers that are granted to the Fed to be a lender of last resort to the financial system. This was politically unpopular to save the big banks that made bad investments, but the fact that the financial sector is so intertwined with the larger economy made it impossible for the Fed not to save the financial system. However, saving the financial system would not be enough. Ben Bernanke would have to institute Quantitative Easing (QE) which is when the Fed buys long-term treasury securities and mortgage back securities to lower long-term interest rates. The Fed had no choice but to bring out this new policy tool since short-term interest rates were already near zero. QE gave about the equivalent of a 3% interest rate cut to stimulate the economy, but the recovery remained slow without additional support from Congress. The Fed couldn't save the economy alone, and the Fed struggled to reach its inflation target for nearly a decade, even with the expanded tools and balance sheet of the Fed.

But as we came closer to full employment (or u*) we were hit by another crisis (COVID). The Fed under Powell acted quickly and concisely to save the financial sector, and add monetary stimulus to the economy, which saved us from a severe recession that was prolonged. Additionally, the Fed received much more support from Congress as they passed trillions of dollars in stimulus funding. This led to the most rapid recovery from a recession in history.

Where does that leave us now?

Ben Bernanke recounting of Fed history was objective and well articulated, but the most interesting part of this book is how Ben Bernanke interprets the Fed's role in this changing economy. Ben Bernanke explains how economic growth is naturally slowing as our population growth decreases, we become older and more sections of our economy are concentrated in information and service-oriented industries have a limited effect on GDP. This means that it has become more difficult for the Fed to reach its inflation target and the natural interest rate is getting lower. That means in times of high unemployment (like during a recession) the Fed can no longer rely on just dropping short-term interest rates. The Fed will have to use more policy tools to fight recessions, and fiscal stimulus from Congress is paramount.

Ben Bernanke also worries about long-term low inflation. The relationship between employment and inflation seems to be weakening (the "Phillip's Curve" seems to be flattening) which has led the Fed to believe that we can reach lower unemployment without triggering inflation. This change prompted the Fed to change its framework, allowing for the economy to run hot for longer to reap the benefits of a hot labor market which often has more benefits for those with lower wages and minorities.

But I think if there is one thing Ben Bernanke stressed the most, it was Fed independence. During the Great Inflation era, political pressure prevented the Fed from doing its job. Volker restored that independence by doing the politically unpopular. However, the Fed has been under fire. After bailing out the banks the Fed was not exactly liked by the public, (understandably). And as the Fed added more and more to the money supply using new and untested tools Republicans began to be worried about Hyperinflation, and the size of the Fed balance sheet. Bernanke understands these concerns but is worried Congress will turn the Fed into a political arm. (And he definitely is not a fan of Trump publicly critiquing the Fed) This would be disastrous to monetary policy. The Fed has to do unpopular things to reach full employment or tame inflation. Independence offers the Fed the ability to do the unpopular.

What about High Inflation now?

Unfortunately, Bernanke wrote this book before much of the inflation of 2022, so he couldn't offer insight. But I believe this book gives the reader a great guide to interpreting the Fed's decision-making today. Jay Powell's Fed missed the mark on inflation (like many economists). It was perceived that u* (the natural rate of unemployment) was somewhere near 3.5% unemployment given the years of low inflation and low unemployment prior to COVID, it could have been lower. Therefore the Fed was surprised to see inflationary pressure present closer to 5% unemployment. But the Fed did not account for COVID-related issues such as supply chain bottlenecks, new variants, and slower labor force participation recovery given the risks of the virus and pandemic aid that gave workers time to find the best-fit jobs.

Inflation is now here. And it may have started with largely pandemic-related factors, but it has spread to other parts of the economy. Inflation has to be dealt with or else the Fed is at risk of unanchoring inflation expectations, returning to a dark era of the Great Inflation.

However, I am a firm believer that the Fed can make inflation lower without making a massive Volker-style shock. (Inflation month to month was 0% in July, and the labor force participation rate among prime-age workers is now near pre-pandemic levels which are good signs of inflation easing so far), But Bernanke often talked about the importance of Fed communication. just the words of the Fed chair can influence the economy, and right now Powell needs the party to cool down. This man I don't see his rhetoric getting any dovish any time soon, but this doesn't mean that the Fed will not look at the promising early data and change course if need be.

Conclusion

Bernanke's insight is unmatched. And his objective tone makes you confident in his analysis. This is one of the best economics books I've ever read from one of the best economists that will ever live. I can't promise that this book will be a page-turner for everyone, but it sure was for me.

[Richard Marney · Rating 5 out of 5]

Arguably, there is no other individual as well equipped to write such a book as Dr. Bernanke. A scholar of the Great Depression, a specialist in monetary economics, and a central banker at the helm of the Fed’s crisis management during and after the Global Financial Crisis, his grasp of economic theory, history/empirics of the money and credit markets and their impact on the real economy, and practical monetary and macro-prudential policy making is unrivaled today.

The book is part history part monetary policy discussion. The first three sections walk the reader through the times of his four major predecessors- Martin, Burns, Volcker, and Greenspan - and then beyond his tenure through his successors, Yellen and Powell. The narrative is detailed and informative, and sets up well the subsequent discussion of “What lies ahead” for 21st Century Monetary Policy. In this fourth and closing section of the book, he explores the nature and ultimate positive policy impact (in his opinion) of the two major innovations of the 2008 toolkit - Quantitative Easing and Forward Guidance. He acknowledges that the Fed’s toolkit requires additional elements and implies (maybe more) that from a societal standpoint monetary policy if unrestrained can create negative forces for financial stability, and income/wealth inequality. This section ends with a strong call for continued central bank independence, but with Dr. Bernanke’s long-standing feature of coordination with fiscal policy.

An essential read!

[Charles · Rating 5 out of 5]

I always dismissed money, particularly macro/monetary policy, as too complicated for me and something best left for others, who had a greater direct interest. In reading this book, I finally decided to take a first step towards understanding how central banks drive monetary policy and by extension, affect the economy and trade.

I found bernanke’s historical overview of the fed reserve and light comparisons to other central banks to be a good primer on the topic - exactly what I was looking for!

Several themes stood out to me:
- the Fed as an underrated example of competent state capacity, with distinctly non partisan processes but one that exercises considerable power. All the same, it still reports to Congress and it’s statutory authority is relatively limited compared to it’s peers because of our relative mistrust of the states role in markets
- the Fed as a canonical example of an institution that relies on its credibility and guidance as part of its power, particularly as lower neutral interest rates limit its monetary tools to recover from recessions. There are few other institutions for whom written communication (in the form of forward guidance) has as much power to shape markets.
- the Fed ultimately as one with broad, but limited specificity in its powers. Interest rates are powerful but non discriminatory. There is still much “juice” left to squeeze in fiscal policy - particularly of interest to me are housing policy (and it’s disinflationary possibilities) and a shift away from gas prices as a driver of energy cost

[Hadrian · Rating 4 out of 5]

Ben Bernanke needs no introduction for devotees of monetary policy, and his academic work also enjoys a broad readership- his contributions range from studies of the Great Depression and financial crises more broadly, on the Japanese economy, and how deflation and the gold standard contributed to the Great Depression. Full confession, I had this book on my desk for a while, but was reminded to read it when the author received the Nobel Prize (along with Douglas Diamond and Philip Dyvbig, notable for their study on the function of modern banking and effects when things go wrong with banks.)

This volume is presented for the lay reader, with some charts and avoiding mathematical models. Bernanke starts with a historical perspective, with the Great Inflation from 1965 to 1982, and covering the tenures of Paul Volcker (1979-1987) and Alan Greenspan (1987-2006) as chairmen of the Federal Reserve.

Part 2 covers the later years of Greenspan's tenure, and then Bernanke's own time in office (2006-2014), concurrent with the Great Recession. Notably, he expresses some regret at having been too 'timid', given how the economy continued to undershoot its targets. Part 3 discusses Bernanke's immediate successors, Janet Yellen (2014-2018) and Jerome Powell (2018-present). The final section of the book contains some thoughts on the future role, current capabilities, and possible challenges of monetary policy, with some brief discussions on the effects of the pandemic on the international economy. There is also a measured and reasonable defense of his own actions as Fed chairman, and he emphasizes the future role of quantitative easing and forward guidance; and these tools were deployed extensively in response to the COVID-19 pandemic.

In the very latest chapters, Bernanke is large concerned with the risk of secular stagnation - that is, a prolonged period of low growth and with a comparatively less risk of inflation. Over the past few months, there was serious concern over whether the period of high inflation was transitory. It would be uncharitable for me to fault Mr. Bernanke for having written a book that took too long between the writing and the publishing, and so does not quite cover every topic I would have hoped for. But for a historical account, for a presentation of his own reasoning, and for some interesting accounts on the future of these policies, I can wholeheartedly recommend this.

[Rachel Childers · Rating 5 out of 5]

If I were to assign a single book on contemporary US monetary policy issues to a newcomer to the field, to accompany or follow a standard intro macroeconomics class, this would probably be it. The first half is a detailed narrative history of monetary policy and the economy over the last 50 or so years, with comprehensive discussions of the major Federal Reserve actions and surrounding context and discussions. It is followed by a thematic discussion of major issues and policies, especially newer or "nontraditional" monetary policy tools such as quantitative easing.

As a guide to how monetary policymakers think, you could do no better than to get it straight from the horse's mouth, and this version takes great pains to be both comprehensive and plainspoken, describing what are sometimes viewed as highly technical issues with a minimum of jargon or complexity. It is very much an opinionated account, both in terms of the theoretical framework (broadly Keynesian in the style of common intro macro textbooks like those of Mankiw or, of course, Bernanke, or, more generally, much of the discussion in the financial and economic press), and in terms of evaluation of specific theories or actions (eg, was QE2 less effective than QE1? Was Alan Greenspan's 1994 rate rise justified? What kind of inflation target, if any, should be adopted? And so on.) Bernanke makes an effort to express opposing viewpoints and potential costs or benefits raised in discussions, but explicitly states where he thinks the balance of evidence lies. Reflecting his status as prominent policymaker, academic, and former head of the American Economic Association, the views are decidedly within the mainstream of the economics profession. On contentious issues where he was directly involved, where some mistakes are acknowledged but the self-assessment is broadly positive overall, one might want to supplement with more detached accounts.

For someone looking to bridge the gap between basic macroeconomic theory and policy, or wanting to better understand the Fed, this brings together a lot of history and discussion that was previously available but more scattered, now into a single coherent description. The history part does better on this than the issue by issue part, which reads more as a collection of loosely connected topics, though some of these include very succinct and clear explanations of those topics. The focus on more contemporary issues does mean that there is little in this book about more traditional monetary policy either in theory or its historical origins pre WWII. As these topics are well covered elsewhere, this is a solid choice to maintain focus, though a reader would benefit from knowledge coming in.

For econ academics, the narrative has an additional use, in documenting policy decisions and their reasons over time, as an argument for time series identification of particular policy effects, and to be honest I wouldn't be surprised if a substantial part of the motivation for having such a history was precisely this purpose. So this is probably required reading for anyone looking to fit a monetary SVAR (or local projection, or monetary DSGE, etc). This structure accounts for some of the choice of issues on which to focus, but I don't think impedes the flow for a reader who doesn't know any of the terms in the previous sentence.

[Isaac Chan · Rating 5 out of 5]

My renewed deep interest in macroeconomics and monetary economics led me to pick up this book. A renewed interest in macro started after taking an engaging course on asset pricing (and subsequently more advanced courses on that), where a very talented lecturer flipped a light bulb in me that finance is essentially applied micro. And, finance is just 1 component of the standard Euler equation, of many variables of the simple constrained optimisation problem of economics. Thus making the clear and beautiful link between finance and macroeconomics, which I particularly adore John Cochrane's work on.

Bernanke however, seems to much of a QE apologist in this book. In his defence of QE, often times he just starts with his conclusion (QE good! Yay! Me so smart) and deflects the critiques of QE one by one, sometimes unconvincingly e.g., the critique that QE distorts markets.

Some topics that Bernanke further stimulated (out of coincidence) in this book, that currently live rent-free in my head:
- Spectacular decline of the neutral rate of interest in advanced economies. All else equal, I buy Larry Summers' and Robert Gordon's Secular Stagnation hypothesis. The Wars were an exogenous shock - no one could've seen that coming, and thus the post-war boom was an unexpected shock on US productivity and upended the scales. We could possibly just be returning to more normal levels of productivity and investment opportunities, let alone the very real observations that the leading industries of today are knowledge industries and thus not capital-intensive. Eager to see how this story progresses. I presume TFP growth in the US was high during the boom, so I'm unsure how that ties into the new normal.

Thus, a non-trivial restriction on central banks' control of short-term rates, and thus, long-term rates as well. They're probs freaking out behind doors, but act calm in front of camera. I don't see fiscal policymakers taking any of the prescribed steps to counter secular stagnation, so maybe a low af neutral rate is here to stay. Once the boomers die out, no one might rmb what a high-rate era and alchemical central banking (almost magical control over rates) was like.

- How would the new normal of NAIRU look like? Decline in NAIRU pre-COVID, but COVID pushed up NAIRU with the amount of slack it created, which led Powell to overestimate the level of full employment and thus cluster-fucking the economy by overheating the shit out of it. To that, I personally don't think Bernanke gave Powell sufficient critique over his mistaken assumptions over transitory inflation. He seems to conveniently forget that.

- All the big macro-finance trends seem to just be the Fed (frantically) reacting to shit ex post all the time. It was sweating bullets tryna fix the Great Inflation in the 70s and 80s, then we got fucked by the GFC and thus pretty much permanently stuck in an ample reserves framework and low rate era, then we got fucked by Covid which led Powell to desperately heat up the economy and now we're just tryna salvage our asses from the inflation that caused. What gives? In short, I'm sayin' that unexpected events dominate the majority of economic outcomes, and we're all just weakly reacting to them. So what's the role of these fancy-pansy PhD econ models that the Fed employs, that only work in normal times with normal assumptions? It's not very useful. Everyone thinks we're making the system safer with ex post regulation, but only ex ante risk matters and as we've seen, it's always the ex ante unexpected risk that fucks everyone over and leaves people reeling. The analogy that Taleb used (which I don't personally completely agree with, but whatever, he gets the point across) is that of the gym bro who's really strong at lifting weights in a controlled environment but sucks ass at lifting awkward heavy objects i.e., the real world of econ that dominate 90% of outcomes. Should we instead focus on making our institutions anti-fragile? Idk.

Thanks Bernanke for an enjoyable book. I love your blogs but you stopped writing them in 2015 :0 :( Books make you more dosh ig. Could consider writing them a bit more technical. This one was way too light. I read 'The Courage to Act' as a spirited high school student back in the day, so this one really felt as if I've come full circle. The enthusiasm, energy, passion and inspiration that coursed thru my veins when I picked up one of my first economics books ('Courage to Act') still powers me today as I read '21st Century Monetary Policy' with a more critical eye and trained mind. Thanks to Bernanke for inspiring a young kid.

[Tanner · Rating 5 out of 5]

Hardcover. 4.5 stars. This was a slog to get through, but very much worth it for me. I found Bernanke's historical approach to the modern Fed and explanations of rationales / studies for things like QE to be super helpful -- esp in markets today where interest rates and inflation are so critical. I thought the last quarter a bit redundant, but a overall, a great primer on one of the most important institutions in America.

[Hunter Hall · Rating 5 out of 5]

Excellent book that fairly portrays the recent history and current state of modern monetary policy (whether or not you agree with the theories.) Although at times slightly repetitive, this book did the best job I’ve seen of explaining why central bankers do certain things and what the expected and actual effects of those things are.

[Tulga G · Rating 5 out of 5]

Central bank, especially Federal Reserve of USA and its activities on financial market through last century, are explained by its former Chair in very detailed way and thoroughly here. I used to work in a banking sector, and that was one of reasons I loved this book. Any reader can find many useful informations and nuances from this book because in the end, financial market is total of all movements of people and monies all around the markets. It was a little boring book to finish but yet a qualitative reading.

[Luciano · Rating 2 out of 5]

Ben Bernanke is one of no more than a handful of living economists that can claim some heritage on John Maynard Keynes tradition of being equally influent in both the academia and in policymaking -- the man has a Nobel prize and a period heading the Federal Reserve through one of the most consequential crises of the history of capitalism, for God's sake! So that's why this book is such a disappointment. It spends too little time telling the history of monetary policy before and after the Great Inflation and too much on the minutiae of all the behemothic regulations and provisions that followed the 2008-09 financial crisis.

[مساعد الشطي · Rating 5 out of 5]

الكتاب كتب من قبل أحد أبرز اللاعبين في مجال الاقتصاد. بن برنانكي أستاذ الاقتصاد و الفائز بنوبل و الأهم هو كونه رئيس البنك الفيدرالي في أزمة ٢٠٠٨.
الكتاب ضخم و حتى منتصفه كان الكتاب عبارة عن سرد تاريخي لما حصل في البنك الفيدرالي منذ أيام فولكر وأحياناً يدخل في تفاصيل الأشياء التي لا تهم رغم إنه في الحقيقة موضوع تاريخ السياسة النقدية أصلاً لم تكن مهمة بالنسبة لي بقدر توقعي للكتاب بأن يعطيني نظرة لمستقبل أدوات السياسة النقدية وهو ما غطاه برنانكي في النصف الثاني من الكتاب مشكوراً و لم يخيب ظني فهناك بالفعل أدوات لم أكن على إطلاع عليها و أضاف إليها بعض من الاقتراحات و نظرته المستقبلية لهذه السياسة.

الكتاب ممتاز و يأتي تميزه من الكاتب نفسه الذي يعتبر أحد عرابي السياسة النقدية في العالم

ملاحظة أخيره و هي إن القاريء يجب أن يكون مطلع بشيء من المعلومات الاقتصادية و تحديداً السياسات النقدية

[Cheenu · Rating 5 out of 5]

Excellent book on the Federal Reserve by the ex-Chair of the Fed who served through the financial crisis. One of those books that avoids sounding like a textbook but at the same time, has the quality of being a good choice for a textbook that people should read as a part of their school or college courses because of the accessible style it is written in.

You might have (negative) opinions on the role of the Fed (and Bernanke's personal role) in the Great Recession and naturally this book probably has a bias towards the Fed but you should read this book as it's far, far more than another recounting of the Great Recession and justifications for the Fed's actions during it.

The Great Recession makes up a significant part of the book but Bernanke's explantation of what the Fed is and why the Fed does what it does is really insightful. The most valuable takeaway from this book is a better understanding of the Fed, monetary policy, fiscal policy and interconnectedness of the markets and economy.

[Jacob Cross · Rating 3 out of 5]

Good survey of the history of the US Federal Reserve, developments in its toolkit and institutions. It later includes in depth financial and monetary accounts of the GFC and Covid, detailing the Fed’s response. Finishes with an overview of current and potential future monetary policies, from the (limited) perspective of 2021. The economic outlook from mid-2025 is dominated by tariffs, the effects of which are still unclear and the Fed has yet to take action. A potential supply side inflationary event may give the Fed cause to use or re-use tools enumerated in this book, refined by experience of the post-Covid inflationary shock. This book provides as wholistic of a view of monetary policy as one could expect from a central banker, and is mostly accessible to readers without a background in monetary policy.

[André Morais · Rating 5 out of 5]

An amazing book on central banking, which can be fairly classified as a seminal text book, although accessible to the general public, because each subject matter is finely explained and no concept is presented without a reachable framing to it.
It covers a very wide array of topics related to central banking, from the politics of it, to monetary policy (both traditional and unorthodox) and financial stability.
Historically, it starts with the Great Inflation and ends with the Covid-19 pandemic.
A must-read, no doubt about it.

[Michael Christie · Rating 4 out of 5]

Parts 1-3 were very good, but the book really grinds to a halt in part 4 as what is in theory a retrospective on the effectiveness of the expanded monetary tools deployed in 2008 feels more like a defense of the Bernanke Fed's use of QE (not that I necessarily disagree, just not what I wanted out of this book). It reaccelerates later in part 4 though, and is overall an unparalleled work of monetary history in the United States by the GOAT Fed Chair.

[Lily · Rating 5 out of 5]

An informative read of how the Fed has evolved since its founding. Former Chair Bernanke is uniquely positioned to tell its tale. Much appreciation for creating this book.

[Victor Vallada · Rating 5 out of 5]

"21st Century Monetary Policy" by former Chairman of the American Central Bank, Ben Bernanke, is a true lesson for those interested in understanding the advancements of modern monetary policy tools, as well as the formation and functioning of Central Banks, with a special focus on the United States. Through accessible and engaging language, the author addresses complex topics in a clear and didactic manner, making the content easily understandable for any reader interested in the subject, capable of captivating both experts and the general public.

The book covers an extensive journey through past financial and economic crises, such as the 1929 crisis and the 2008 crisis, as well as the crisis triggered by the 2020 pandemic. Exploring contemporary challenges faced by developed countries, the author highlights crucial issues, such as the persistent decline of natural interest rates and reduced inflation rate, which impose significant limitations on the scope of Central Banks' actions and potential modern financial instabilities and their risks.

Bernanke also emphasizes the importance of Central Banks in modern economies, highlighting the crucial role they play in conducting monetary policy, their practical limits, and underscores the need for the political independence of these institutions to enable effective formulation and implementation of appropriate monetary policies.

Definitely, an indispensable resource to strengthen the debate on the independence of the Central Bank in the current Brazilian context, where short-term political pressures and questionable exotic theories present constant threats to the institution's credibility.

[Ian Karundeng · Rating 4 out of 5]

A good insight into the highly misunderstood entity that is the federal reserve. Ben gives the history, policies, intentions, and future outlook on the fed’s tools for governing the US monetary system.

[Clay Wescott · Rating 5 out of 5]

An insider tells a thoughtful story of how the US central bank has changed and stayed the same in recent decades. A crucial change has been towards greater transparency. In Bernanke's view, the Fed has the difficult job of defining problems correctly, taking appropriate actions, and forcefully communicating to markets what they are doing, why, for how long, and what needs to happen to change this trajectory. The Fed and other central banks in high-income countries have expanded their communication with markets and the public. "Monetary policy is 98 percent talk and 2 percent action". After each Federal Open Market Committee (FOMC) meeting (at least 8 per year), the post-meeting statement includes forward guidance on the consensus views on economic trends and expectations for future actions. There is also a "dot-plot" including views of each board member on likely actions the Fed will take. None of this is binding, but research still finds this forward guidance to be influential in shaping market behavior, perhaps even more so than the actual actions taken. Visit https://www.federalreserve.gov/moneta...

The Fed's Congressionally mandated goals are maximum employment, stable prices, and moderate long-term interest rates. Still, the numerical targets change over time, and the Fed takes pain to explain why. Also, how the Fed meets the targets changes over time.

The book discusses three significant economic changes that have led to big changes in how the fed works. First, the behavior of inflation has changed. Following the disaster of high inflation in the 1970s, the Fed established its credibility in using monetary policy to bring inflation sharply down in the 1980s, where it stayed mainly at or below the target of 2 % pa.
Some might question the efficacy of the Fed's policy to keep inflation around 2 percent. Since the 2008 crisis, the rate has been below this and, more recently, well above. Bernanke's answer for the first part of this is that the target is for average inflation over time, and it was trending towards 2 percent as soon as the economy started to recover. The book doesn't say much about the recent inflationary surge: over 8% pa at mid-year 2022, 6% over the target rate; it came after the book was written. In recent FOMC meetings, the Fed has sharply increased interest rates to bring down inflation. Bernanke states that one issue here is balancing the Fed's two goals: employment and inflation. The Fed revised its five-year policy statement in 2020 to say it would not take pre-emptive action against inflation as it had before because this might come at the expense of too many jobs lost. The pandemic inflationary surge was related to particular features of the pandemic slowdown and not a long-term structural change; thus not as problematic as if it were the latter. Still, the Fed needs to be careful not to lose its credibility in controlling that it earned during the Volker years in the early 1980s.

A second related change was the reduction in nominal interest rates. Due to shifts in the context, such as an aging population saving more, lower business productivity growth, and thus increasing funds chasing fewer profitable opportunities, nominal interest rates are lower than before. Therefore the Fed's fiscal space for addressing economic downturns with interest rate cuts is reduced. The Fed has needed new tools to deploy when short-term interest rates approach the lower boundary: a much larger balance sheet, new financing tools, and greater attention to nonbank financial institutions or shadow banks since the 2008 financial crisis. Bernanke presents the evidence as to why the Fed chose the policies, tools, and targets it did and how effective the Bank was in implementing the policies, explaining them to the market, and changing market sentiment in the desired directions. Bernanke is candid in pointing out where the Fed got it wrong, pointing out that economics and behavioral change are not exact sciences. He makes the case that while the Fed made mistakes, it has a good track record of economic policymaking compared to the other parts of the government. He notes the disastrous China trade war from 2018, repeated threats from Congress to default on debt payments, and clumsy attempts by a former president to spread misinformation and to nominate unqualified candidates to become Fed board members.
The Fed's relative success has come partly from an aspect that hasn't changed during this turbulent time: its independence from political masters. This isn't to say that the Fed is not aware of political views; a critical part of the transparency plan is to build relationships with political leaders and keep them in the loop on the Fed's thinking. Also, the Fed has never been entirely independent. The President nominates the Fed chairman and board members for four and 14-year terms, respectively, and the Senate confirms them. Congress sets the goals of managing inflation and unemployment. However, the Fed leadership can't be fired while serving their terms, despite political threats by politicians to do so. Also, the Fed isn't dependent on Congress and President for its operating funds; it earns them from its financing operations and, most years, transfers hefty profits to the US Treasury. Overall, the Fed is independent enough that critical decisions draw on the best available evidence regarding the country's best long-term interest. Fed board members don't always agree, and a majority must support critical decisions to go ahead.
A third significant economic change has been financial instability due to new market complexity from globalization and financial innovation, among other things. Should the Fed take on the financial system's stability as a third objective? Bernanke goes through the pluses and minuses and concludes there are usually better tools than monetary policy for addressing this. For example, banking regulation and macroprudential work (dealing with systemic risks to the system) can be effective, but both need improvement in the USA. On rare occasions, monetary interventions may be appropriate, but not often, since monetary policy is too blunt an instrument for the fine-tuning often needed.

Other changing forces could become significant over time. Climate change is a big issue, but not for the Fed. Monetary policy focuses on a much shorter timescale: at most a decade or so which is the time it can take to recover from a downturn like the one in 2008. The Red might work with Banks in its regulatory work to get banks to price assets for climate risk. It lacks the tools of some central banks that can buy commercial paper and could use this as a tool to promote climate change.
There's an intriguing section on digital money, thinking that all Americans could have a Fed account and use this instead of cash. Like anything, there are pluses and minuses. China has gone furthest with such ideas, and the privacy concern is apparent, but the convenience makes it tempting. The Fed is a leading user of big data and AI for economic modeling, and these and other technologies could lead to innovative approaches to increasing the Fed's policy space. Diversity at the Fed needs to increase, but it's slow when the economics profession is so slow to diversify.

This is only a summary of the nuggets of wisdom here. The book will considerably interest market makers, economists, and concerned citizens. A Fed vice chair once said that many Americans think the Federal Reserve is a national wildlife park; this book will set them straight. There's a website where you can give feedback. The author says he will publish a sampling of the feedback and his responses, but it's not there yet .

[Jami Adarsh · Rating 5 out of 5]

The book has 4 major themes 1
The rise and fall of inflation 2. 2008 financial crisis and recession and the period thereafter 3. Covid and its response 4. What aherd for fed in coming years ...... it helped me understand the entire history of fed formation from 1913 all major events of last 100 years and how fed responded , other major concepts/events like 1930 great recession, delinking of the gold standard , hyperinflation period of 1965 to 1982 and why rates were not increased then , keynesion theory of employment , Phillips curve of unemployment, major stock market crashes and responses , Asian crisis of 98 and how its way if thinking changed after each major events , other concepts like QE1 and QE3 how and why they came in and a detailed explanation of each of it and how it works, the wide varity of tools Fed deploys to meet its 2 key objectives as per latest policy of maximum employment and 2% inflation, he also explains fishers principle , hyphotheses of global saving glut , secular stagnation hypnosis, increase in wealth inequality and its impact , the Japanese trap , Dodds frank tests on financial institutions, how fed used QE's and low rates to bring down unemployment from 9% to 3+ before covid , revision of Phillips curve where supply shocks increase prices leading to stagnification , negative interest rate and yeild curve works , nominal GDP concept , helicopter money , portfolio theory , underlying factors for a risky behavior and finally he also explains his view on future risks and emerging concepts like climates change , digital currency and Cripto currency .... with so much information the absorption ratio was 50% I feel but an excellent book to understand how fed thinks

[Steven · Rating 5 out of 5]

This book is an excellent tool for understanding the Federal Reserve and monetary policy. It can easily be understood by anyone. One may not agree with Professor Bernanke, but it is important to understand his views to better understand the Fed's response to recent crises.

[Tom Fencl · Rating 3 out of 5]

The obvious appeal of the book is its author, who as a source for the subject has little competition. The detailed knowledge of the subject is apparent on every page and justifies powering through what too often is a needlessly wordy tome.

The organization of the book is also problematic. In effect, there are three books, none particularly satisfying in isolation and lacking clear focus in combination.

Book One you could call “a short history of the US monetary policy”, but so what arbitrarily starting where Milton Freedman finished and ending (almost) in the present, but with an intermezzo of Book Two, which is — understandably given the author — “an ‘I was in the room’ memoir”. Book Three is a broad discussion-slash-defense of the current mainstream monetary policy positions.

No regrets buying the book and I certainly will keep it as a reference material for future, but also no regrets about skimming through the last approximately 150 pages at 1.5-2x my normal reading speed. Just too many words that didn’t need to be written.

[CANER IRFANOGLU · Rating 5 out of 5]

21 inci yüzyıl para politakalari 2022 ekonomi nobel odullu ve 2006-2014 arasi Fed baskankigi yapmis. Ben S. Bernanke tarafindan yazilmis.

Yazar, kitaba fed in yapisi yetkileri ve fomc yi aciklayarak basliyor. FOMC 12 Eyaletin Merkez Bankasi liderleri ve kurulun lider tarafından atanan 7 üye olarak totalde 19 üyeden oluşuyor. Her basin iletişimi oncesi bu üyelerin 3 yıllık gelecek ve sonrasi tahminleri paylasiliyor. Bu tahminler enfladsyon, faiz oranları, issizlik, GDP büyümesi ve belirsizlik miktarı saptanması ve bunların önceki doneme gore degisimlerinden oluşuyor. Kitap bundan sonra tarihsel bir perspektif aliyor. 1950 lerden baslayarak kitabin ilk yarisinda Jerome Powell in baskanligina kadar (2017) ki donem aktariliyor.

Burada eski zamanlarda philips egrisine bagli anlayisin yayginligindan bahsediliyor. Buna gore yuksek issizlik enflasyonu dusuren bir faktorken, tam istihdam da halkin elini bollastirdigi icin enflasyonist bir etkiye sahip oluyor.

FED in 2 onemli araci iskonto orani ve federal fonlama orani olarak belirtiliyor. Iskonto orani bankalarin direk FED den kisa vade borc almasindaki faizi temsil ediyorken, federal fonlama orani bankalarin birbirine gecelik borc verirken kullandigi faiz oranini temsil ediliyor. FED bu orani banka rezervlerini manipule ederek kontrol ediyor. Bankalardan tahvil aldigi zaman rezervler artip faiz oranlari duserken, tam tersinde de yukseliyor.

Daha sonra 70’ler doneminde burns un hukumet etkisinde kalip yeterince faiz yuksektmedigi icin stagflasyonla gecen yillardan bahsediliyor. Bu donemde insanlarin enflasyonun surekliligine inanmasinin nasil kendini gerceklestiren bir kehanet olduguna deginiliyor.

Daha sonra 80 lerde daha şahin olan volcker yonetimi alip sikilasmaya gidiyor ve enflasyon o zamandan beri kontrol altina aliniyor.

Volcker ve selefi Adam Greenspan FED i bir hayli basariyla yonetiyor. Donemleri 1980-2006 arasini kapsiyor. Bu donem de yasanan temel problemler, brezilyanin ve uzak dogunun default a gitme riski olarak belirtiliyor ve FED in zaman zaman global rol ustlenmesinden bahsediliyor. Cunku FED in gorevi amerikan ekonomisini yönetmek olsa da global bir kriz de amerikan piyasasini ciddi sekilde etkileme riskine sahip.

2000 lerin basinda devaluasyon (fiyatlarin gerilemesi) riski oldugundan bahsediliyor. Buna karsi 0 a yakin faiz oranlari da FED in hareketini kisitlayici nitelikte oluyor.

Yil 2006 ya geldiginde kontrolsuz verilen ipotek kredileri sistem uzerinde risk olusturmaya basliyor. Zamanla bunlari iceren varliklar yuksek riskli olarak addediliyor. Ve kriz bir bankanin bunlari kabul etmemesiyle basliyor.

FED bununla savasmak icin piyasadaki son kredi veren rolunu kullaniyor ve piyasayi canlandirmaya calisiyor ayrica son kredi alan olarak bu yuksek riskli varliklari kendi balans sheet ine ekliyor.

Ayrica bu donemde piyasalari kurturmak icin parasal genisleme (QE) uygulanmaya baslaniyor. QE FED in uzun vadeli alimlar yaparak balans sheet ini yukseltirken, bankalarin rezervlerinin artmasi anlamina geliyor.

2006 - 2016 arasi faiz oranlari 0 a yakin kaliyor, ekonomi krizin etkilerini yavasla atlatip toparlanirken bir miktar QE ye bagimli hale geliyor ve 3 round QE gerceklestiriliyor.

Yine bi donemde yazar kendi baskanligi doneminde FED in daha transparan sekilde hareket etmesi icin adimlar atiyor. Gucunden dolayi uzerinde senato ve baskan tarafindan surekli baski bulunan FED bir yandan da pozisyonunu korumaya calisiyor. Enflasyon da resmi olarak %2 hedefi bu dönemde koyuluyor ve FED baskani duzenli olarak basin aciklamalari yapmaya basliyor. Burada sozlu yonlendirme olayi devreye giriyor. FED soylemlerinde cok dikkatli olup, piyasa ile acik iletişim kurmaya onem veriyor.

2018 yilinda FED uzun sure sonunda sikilasmaya gidiyor. Bu donemde ilk doneminde başkanlık yapan Trump son 50 yil da olusan FED in bagimsizligina saygı gösterme durusundan saparak, Powell’i hedef haline getiriyor. FED bu durumu güzel yönetiyor ve bagimsiz hareketine devam ediyor. Yil 2020 ye geldiginde Pandemi dünyayı vuruyor. Pandemiye FED hızlıca faizleri yaklaşık 0 a indirerek ve QE programını genişleterek çabukça tepki veriyor.

Kitabin bu kısminda ayrıca nötr politika orani (R*) ve doğal issizlik orani (u*) dan bahsediliyor. Bu oranları Powell in yıldızlar arasi yon bulma benzetmesi konuyu güzel acikliyor. Bu oranlar yildizlara benzetilip bir yerde oldukları dusunuluyor ve yıldızlar arasi yon bulmak kolay gibi algılanabiliyor. Fakat problem bunların tahminden ibaret olduğu icin yildizlarin gercek konumunu bilemiyor olabileceğimiz kabullenmesinde. FED’in buradaki ihtiyatlı tutumu onemli. Fakat yıllar icinde de teknolojinin gelişmesinin enflasyonu dusurucu bir etkisi olduğu ve buna bağlı olarakta doğal faiz oranlarinin dustugunden bahsediliyor. Bu da FED’e para politikasında daha az manevra alanı bırakıyor.

Azalan manevra alanında yeni araçlar onem kazanıyor. Bu kısımlarda QE derinlemesine inceleniyor ve yazar belli varsayımlarla QE nin %3 lük faiz indirimine kadar etkisi olabileceği sonucuna varıyor. QE’nin olası yan etkilerini yazar tek tek curutuyor ve daha güvercin bir imaj çiziyor.

Son kisim geleceğe odaklanıyor. Burada yabancı devletlerin kullandigi araçlar ve tecrübeleri tartisiliyor. Krediler icin fonlama, negatif faiz oranları ve getiri eğrisi kontrolu buraki seçenekler.

Yazar daha sonra farklı enflasyon hedeflemelerinden bahsediyor. Para politikaları ve risk alimi kısmında makro ihtiyati politaklardan bahsediliyor. Bunlar 2008 oncesi tek tek ekonominin kisimlari denetlenirken genel saglini ölçmeye calisan yaklaşımlar ve denetlemelerden oluşuyor. Yazar bunların para politakalarini guclendirmede en yetkin hameleler olduguna değiniyor fakat yapılan degisikliklerin yetersiz ve Trump yönetiminin denetleme taraftarı olamayan tutumunundan bahsediyor.

[bussy barbecue · Rating 5 out of 5]

A thorough book on monetary policy and historical economics from someone no greater than Bernanke. Despite being 400+ pages of chronological monetary history and unbiased retellings of the most noteworthy recent economic events, it felt well paced and extended a calm stolid tone reminiscent of his handling of the financial crisis during his chairmanship. As someone fascinated by monetary policy, I gleaned a lot from this book and will be going back to my many flagged passages.

[Isabelle LaBianco · Rating 3 out of 5]

The book is as media trained as bernanke himself

[Gignac · Rating 4 out of 5]

Great book very well written and with a lot of information but it did not convince me that QE works

[Krispy_Pages · Rating 4 out of 5]

The 21st Century Monetary Policy is a fascinating account of the evolution of the Federal Reserve since the 1950s, and a stalwart defense of the status quo: of the Fed's remit, its independence, and the tools and practices it now uses to pursue its mandate. Through the lens of Ben Bernanke, former Chairman of the Fed, we embark on a crusade that traverses the annals of economic history, dissecting the Fed’s response to past crises.

This book is a work of history, not of theory, Bernanke studiously avoided sojourns into theory for its own sake. Rather, he limited himself to only theoretical developments that had serious bearings on policy making. For example, you may find much about the evolution of monetary policy, monetarism, Keynesian, neoliberalism, rational expectations and supply-side economics but little about topics as Ricardian equivalence, time inconsistency, or the fiscal theory of the price level.

While contextualizing the evolution of monetary policy, tracing its historical roots, the author examined each of his predecessors and successors during every era. Starting from the Great Inflation period of the 1960s and 1970s. Herein lies a discerning dissection of the political exigencies that impeded Arthur F. Burns’s and the Fed’s efficacy in combating inflation over protracted intervals, leading to the unsettling phenomenon of unanchored inflation expectations and obstacles in sustaining price stability.

The narrative then shifts towards the transformative tenure of Paul Volker, characterized by his resolute determination to implement politically unpopular measures aimed at restoring price stability. This included raising interest rates to precipitous levels, precipitating a deep recession. Though Volker’s hawkish approach forced the economy to go through a period of high unemployment, he succeeded in quelling the specter of inflation, thus bolstered the Fed’s credibility and ultimately anchored inflation expectations for the subsequent decades. Volker’s interest rate hikes gave credence to the Phillip’s Curve—hypothesized a relationship between employment and inflation. As unemployment came closer to the natural rate of unemployment (u*) then inflation would then rise, vice versa. Volker tested this by creating mass unemployment, which he did reduce inflation.

The subsequent era under Alan Greenspan epitomizes a period of relative price steadiness and economic buoyancy, albeit marred by a regrettable failure to anticipate the dynamics within the financial landscape, culminating in the cataclysmic vortex of the financial crisis. Bernanke’s stewardship at the helm of the Fed is portrayed as a chronicle of crisis management, where urgent interventions were marshaled to stabilized the financial nexus, complemented by monetary maneuvers such as quantitative easing to spur economic traction amidst tepid convalescence.

However, notwithstanding the deployment of these measures, the Fed grappled with persistent challenges in attaining its inflationary objectives, exacerbated by the advent of the COVID-19 pandemic. Bernanke underscores the imperative of adapting to dynamic economic landscape and the necessity of enriching the Fed’s policy toolkit with additional instruments and emphasizes the role of fiscal stimulus from legislative quarters in cushioning the vicissitudes of economic downturns.

Throughout the book, though in a restrained style, Bernanke did make criticisms. The book’s antiheroes are Arthur F. Burns—the Fed chair who did not confront rising inflation in the 1970s; Donald J. Trump and Richard Nixon, presidents who tried to intimidate Fed leaders; and modern-day congressional Republicans, some of whom he views as more concerned with partisan advantage than the country’s well-being. Bernanke offers a mixed judgment on Alan Greenspan, who presided over a 1990s boom but also missed the gathering signs of crisis in the early 2000s and, unlike Bernanke, aggressively pushed his personal preference for low taxes.

Subtheme of this book involved the interaction between Fed policy and politics. In the realm of monetary policy, where the Federal Reserve only normally sets short-term interest rates and its other policy instruments independently, though not as much as compared to in the realm of fiscal policy, politics has still been an issue. During Lyndon B. Johnson’s presidency in the 1960s, his administration’s ambitious “Great Society” programs required significant funding, posing a challenge to maintain economic stability. Johnson aimed to finance these initiatives while promoting low unemployment and economic growth. This pursuit clashed with the Fed’s traditional focus on price stability, led by William McChesney Jr. The Fed expressed concerns about potential inflation resulting from accommodating Johnson’s expansive fiscal policies. Despite reservations, the Fed succumbed to mounting political pressure and implemented looser monetary policies in 1965, including a reduction in the discount rate. This led to subsequent inflation and economic instability.

Another example of political influence causing the Fed to make questionable decisions occurred during the presidency of Richard Nixon in the early 1970s. Nixon, eager to bolster growth and ensure his reelction, exerted influence on the Fed to implement wage and price controls in 1971. The Fed complied with Nixon’s directive, leading to a compromise of its independence and ultimately caused price instability in the next decades. These examples all served as cautionary tale of the risks associated with political interference in central bank decision making and the importance of preserving the Fed’s autonomy to uphold the integrity of monetary policy.

Do I have a bone to pick with this book? Not really, but my dad did.

As someone who has experienced the 2008 financial crisis, my dad had a lot of beef with this book and I summarized his 3 hour rant into this:

Many moons ago, the Fed once believed that the job of the central bank was to take away the punch bowl “just when the party was really warming up.” But in recent years, this puritanical approach to managing the ups and downs of the economy had fallen into disrepute. Central bankers have come to believe that they must “do whatever it takes” to pull an economy out of a serious downturn, and there is a problem with this.

Throughout the book, never once did the author admit that expansionary monetary policy actually disproportionately favor the higher income class and significantly contribute to income inequality. The Fed’s problem lies in its reluctance to acknowledge the prevalence of asset bubbles, the significant impact they exert on creating income inequality, and the Fed’s own role in their creation. This blind spot regarding the irrationality and speculative activities on Wall Street led Bernanke to reassure the nation in 2008 that the subprime mortgage market posed no significant threat to the banking system. The same blind spot has allowed the Fed in recent years to overlook phenomena such as meme stocks, tech unicorns, and cryptocurrency fervor, as well as the surge in private credit. Instead of recognizing these as potential risks deserving of attention, the Fed has dismissed them as occasional exuberances.

Bernanke's analysis reveals a surprisingly limited grasp of the intricate dynamics underpinning inequality within the contemporary economy of the 21st century. Fed officials relied on comforting data analyses that betrayed breathtaking naivete about the behavior of Wall Street investors and dynamics of financial markets.

In the asymmetric monetary framework outlined by Bernanke and now embraced by the Fed, interest rates will remain "lower for longer" during economic downturns and recoveries, but will not be kept elevated for extended periods during economic expansions. The central bank will inject trillions of dollars into the economy to combat recessions but may struggle to retract them before the onset of the next downturn. This approach may incentivize speculative behavior among investors, fund managers, and corporate leaders, as they are provided ample access to inexpensive capital with the assurance that it will remain available for the foreseeable future. Consequently, when inevitable market corrections occur, the Fed will intervene once again, pledging to take "whatever it takes" to stabilize the financial system and shield risk-takers from the full consequences of their actions.

This framework essentially establishes a one-way ratchet monetary mechanism, necessitating forever-increasing injections of monetary stimulus to sustain full employment, thereby establishing a support level for asset prices with little indication of an upper limit. Its emphasis on "forward guidance" regarding future Fed actions encourages market participants to align their strategies, while simultaneously limiting the Fed's ability to swiftly adapt to evolving circumstances. While Bernanke and his successors may profess to act in the interest of the broader population, the underlying message conveyed to Wall Street is unequivocal: "Do whatever you want and we will once again “do whatever it takes” to bail you out when things go south.”

That sums up the rant my dad had about the book, just offering another perspective. It is true that the potential effects of expansionary monetary policy on income inequality, financial markets, and nominal GDP targeting metrics weren’t exactly elaborated in this book. Yet, one can also argue that the Fed may not necessarily be fully responsible for all these things, after all there are some debates when it comes to the role and responsibility of the Fed. Overall, to me, this is still a good peek behind the curtains of one of the most influential institutions in recent modern history. I’d recommend this book to anyone who wishes to learn the history of the Federal Reserve.

[Brad Eastman · Rating 3 out of 5]

This is two books in one. The first two-thirds of the book are a history of post-war American monetary policy set by the Federal Reserve Board - think September 11 or Covid as seen through the lens of interest rates. The last part of the book looks at arguments for and against the novel monetary policy tools deployed by the Fed in the 21st Century and possible new tools the Fed could use in the future. I would have given the first part four stars and the second part two stars.

Let me start with one criticism of the first part of the book. Mr. Bernanke (unsurprisingly) focuses on macro economics through a dry lens of statistics. Of course, these statistics are necessary to understand trends and the whole situation. However, Mr. Bernanke almost completely ignores that statistics actually affect real people's lives. If you want a history of an earlier period of the Fed that traces the impact of Fed decisions on actual people, I recommend Secrets of the Temple by William Greider. I agree much more closely with Mr. Bernanke's politics and point of view, but Mr. Greider reminds us that decisions by the Fed run through all of our lives, even if we don't understand it. Mr. Greider also wrote in a much more lively and non-academic way than Mr. Bernanke.

There is much about the first part of the book, though, that deserves a lot of praise, particularly as we fall through the looking glass of the Trump administration. For instance, Mr. Bernanke demonstrates that policy is nuanced. There is rarely one good path forward that is very clear to everyone. Mr. Bernanke understood that he had to listen seriously to his critics, consider their points of view and adjust his policy accordingly. He built consensus rather than beat his critics into submission. Somehow, every other organ of government has lost sight of this need to develop policy.

Mr. Bernanke was also able to evaluate his decisions in light of observed conditions. Sometimes, the economy did not act the way economic theory predicted. Rather than dismissing the non-compliant observations, Mr. Bernanke asked what about the theory needed to change or how should policy be adjusted to match observed results. Mr. Bernanke had to admit that he was at least partially wrong in a prediction and adjust. He did not slavishly devote himself to simplifying theories and insist that it would all work out in the long run. In this regard, contrary to MAGA America, Mr. Bernanke is very complementary of his successor, Jerome Powell, and his response to COVID. He also understands the environment of uncertainty in which Mr. Powell had to act.

As to the economics, I am in no real position to question Mr. Bernanke. Still, he focused a lot on inflation and unemployment, without really considering the labor participation rate. My understanding of the Great Recession is that a lot of folks got so discouraged that they just quit looking for a job. The unemployment rate might have fallen, but that was at least in part because the denominator was shrinking, not because the numerator was increasing. Understanding policy effects on labor participation would have been interesting to consider.

Throughout the whole first two-thirds of the book Mr. Bernanke deals with the underlying current that economics is the study and modeling of human decision making, which is not entirely rational and not stable. Over time. the determinants and emphasis change much more than theory suggests. Policy decisions work best when horizons are short. Flexibility and compromise are virtues in the face of complexity and uncertainty, not weakness.

The second part of the book is a dry literature review that belongs in the dustbin of an academic journal. At times I did not even think I could finish it.

[Muriel · Rating 5 out of 5]

I ponder why Bernanke wants to write this book, he already wrote several books on the history and response of the Great Recession, which was an important economic event happened during his watch at the federal reserve, likely what history would make him known for. This book, in contrast, tries to explain past and almost up to the moment monetary policy, at some level it is almost trying to explain to lay person what Powell is doing at the Fed. Why they would engage in lowering the interest rates during the pandemic response, why did they think the inflation would be transitory, etc. Isn’t this encroaching on Powell’s future books? Aren’t there some turf demarcation for current and future Fed person’s book writing?

I guess the answer partly lies in the dire historical situation that the federal reserves found itself in. Having reserved independence for many decades (which is itself reflecting the hard lessons learned from the Nixon-burns fiasco when the fed lacks such independence credibility), Fed independence is under assault from the populist president trump, and many other ill-informed and performative politicians who are actively trying to intervene Fed monetary policy. The general mistrust of the government and the experts, flamed by decades of politicians bashing on both, is creating a dangerous vacuum that if the lay person don’t understand what Fed Is doing, the prospect would grow even more appealing to haul the Fed people in front of congress, and answer some intervenant questions for pure political gain. This is the reason that Powell has started to explain Fed policy and work in plain English for the everyday people, it must also be the reason for Bernanke to write this book ( everyone else is too busy with actual policy work, Powell Yellen, etc)

The book touches other interesting parts:
- the rationale and innovative ways for Fed to intervene in international crisis such as Mexico peso crisis, is using an almost blank chèque argument that such currency Movement could have impacts on us economy, Greenspan Rubin and summers found ways to use Fed borrowing capacity to help Mexico…
- similar discussions of past policy interventions for Russian and Asian currency crisis are also enlightening. Alright this happened during Greenspan’s term, historical Fed actions are discussed fairly extensively in the book.
- Bernanke didn’t shy away from saying that Greenspan’s success partly comes from his extraordinary political skills in bring himself very popular with both sides of the politicians. Greenspan might have missed the hosting bubble etc
- random bit, when Bernanke asks Greenspan for advice he says to watch for a clock to make sure the meeting ends on time, seriously?

- Yallen’s Career needs such improbably prepared resume to get where she was for the Fed

- despite what some academic people think, bernanke says many fine Fed chairperson doesn’t have PhD and could serve well, including Greenspan Powell etc.

- Nixon-burns fiasco where burns tried monetary easing for Nixon‘s benefit

- interesting mentioning of pboc trial in cryptocurrency.

Note, the book contains a fair number of “r-star” sentences and could get disorienting for listening to the audio book, for some people