The Political Orphanage What the Hell Does the Federal Reserve Do?
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Jul 30, 2025 Jeremiah Johnson, founder of the Center for New Liberalism and host of the New Liberal podcast, dives into the complexities of the Federal Reserve. He explains its independence and the significance of targeting 2% inflation. The discussion includes a fascinating metaphor using a babysitting cooperative to illustrate economic principles and the imaginary nature of money. Johnson also explores the dual mandate of the Fed, balancing inflation and employment, and critiques the effectiveness of economic interventions. Get ready for some enlightening insights and humor!
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Babysitting Recession Analogous to Economy
- A babysitting cooperative in Washington, D.C. used babysitting tickets as currency to exchange babysitting hours.
- When tickets became scarce, families hoarded them, causing a "babysitting recession" where babysitting demand dropped drastically.
Money as Economic Lubricant
- Money acts as a lubricant facilitating exchange of goods and services in the economy.
- Both the quantity of money and its velocity (speed of circulation) significantly impact economic activity and inflation.
Federal Reserve's Independence Explained
- The Federal Reserve is independent in setting monetary policy, free from direct presidential or congressional control.
- The Fed is ultimately a public institution controlled by the federal government through appointed governors.
