Chicago Booth Review Podcast
Who does Raghuram Rajan blame for inflation?
Dec 13, 2023
Raghuram Rajan, former Governor of the Reserve Bank of India, discusses the Fed's role in the US economy, its response to the pandemic, and the influence of central banks in causing inflation. The podcast explores the power of central banks, their response to inflation during the pandemic, and the impact on government finances. It also examines alternative approaches to the Fed's decision-making and the role of central banks and politicians in exacerbating inflation.
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Quick takeaways
- The US Federal Reserve's monetary policies, including balance sheet expansion, have unintended consequences and potential fiscal problems for the government and the Fed itself.
- While the Fed did not directly cause inflation, its actions could have exacerbated the situation by aiding fiscal policies and not sufficiently considering the long-term consequences.
Deep dives
The Fed's Role in Inflation and Unintended Consequences
The podcast episode discusses the role of the US Federal Reserve in the return of inflation and its response to the COVID-19 pandemic. It explores the question of whether the Fed is to blame for causing the recent inflationary trends. The episode highlights that central banks have gained significant power and responsibility, but also face the challenge of earning public legitimacy. It delves into the historical context, institutional memory, and unintended consequences of the Fed's monetary policies, particularly in relation to balance sheet expansion. The podcast also examines the interplay between central banks and politicians in influencing inflation and government spending.
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