Macro Musings with David Beckworth
Jeffrey Lacker on the History of Fed Credit Policy and the Four Doctrines of Fed Lending
Dec 9, 2024
Jeffrey Lacker, a senior scholar at the Mercatus Center and former president of the Federal Reserve Bank of Richmond, dives into the evolution of the Fed's credit policy. He reflects on the Shadow Open Market Committee's role and insights from a recent conference. Lacker discusses the shifts in monetary policy frameworks, including inflation targeting changes. He explores the implications of helicopter drops for fiscal policy and the evolution of the Fed's role as a lender of last resort, especially during financial crises.
56:06
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Quick takeaways
- The Federal Reserve's credit policy has evolved from a traditional lender of last resort to a more interventionist role during financial crises.
- The Shadow Open Market Committee has significantly influenced public discourse on monetary policy, particularly around inflation control and stability.
Deep dives
The History and Significance of Federal Reserve Credit Policy
The evolution of the Federal Reserve's credit policy highlights its historical significance in managing economic crises. Originally established to maintain monetary stability, the Federal Reserve's role expanded significantly post-2007, marked by unprecedented interventions in credit markets to stabilize the economy. This interventionist shift was catalyzed by the financial crisis, where traditional monetary policy mechanisms proved insufficient. Understanding the transition from lender of last resort to a more active role in supporting financial systems reveals the growing complexities and responsibilities of the Federal Reserve in modern economic governance.
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