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David Beckworth

David Beckworth



Articles by David Beckworth

Binyamin Appelbaum on "The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society"

13 hours ago

Binyamin Appelbaum is the lead writer on business and economics for the editorial board of The New York Times, and he was previously a Washington correspondent for The Times covering the Federal Reserve and other aspects of economic policy. Binyamin is also a returning guest to the show, and joins today to talk about his new book, *The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society*. David and Binyamin also discuss Milton Friedman’s influence on economic thought during the postwar era, the history of the emergence of supply side economics, and the consequences that have arisen from committing too strongly to free market principles.
Read the Full Episode Transcript
Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you

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Bill Nelson on the Repo Market Stress, the Fed's Operating System, and the Prospects for a Standing Repo Facility

October 7, 2019

David Beckworth: Our guest today is Bill Nelson. Bill was a chief economist at the Bank Policy Institute. Bill previously was a deputy director of the Division of Monetary Affairs at the Federal Reserve Board, where his responsibilities included monetary policy analysis, discount window policy analysis, and financial institution supervision. Bill also worked closely with the BIS working groups in the design of liquidity regulations. Bill has written widely on the Fed’s operating system, and joins us today to discuss it, and the recent turmoil in money markets. Bill, welcome to the show.
Bill Nelson: Thank you. Thanks for having me.
Beckworth: Oh, it’s great to have you on. I’ve participated with you in an event at AEI. We were just talking about corridor systems, and George Selgin’s book,

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Jim Dorn on the History of Monetary Policy in Washington D.C. and its Future

October 2, 2019

David Beckworth: Our guest today is James Dorn. Jim is a vice president for monetary studies at the Cato Institute, and is the director of Cato’s annual Monetary Policy Conference. He has written widely on Federal Reserve policy and monetary reform. He has also edited more than ten books, including The Search for Stable Money, and The Future of Money in the Information Age. Jim joins us today to discuss the history of monetary policy in Washington D.C. over the past four decades, as well as some of his own recent work. Jim, welcome to the show.
Jim Dorn: Thank you, David.
Beckworth: Great to have you on. Now, I kind of cut my teeth on monetary policy reading some of your work in the Cato Journal, and the authors you’ve published there, and your conferences. I remember in grad school coming

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The Challenges of Dollar Dominance

September 6, 2019

Is the US dollar too much of a good thing? Can its success in becoming the main currency of the world also make it a curse for global financial stability? These and other questions about the dollar’s dominance are increasingly being considered by policymakers, academics, and journalists as the reach of the dollar continues to grow. These concerns were also front and center at the Kansas City Federal Reserve Bank’s conference last month in Jackson Hole, Wyoming, an annual gathering of influential voices in central banking.
Concerns over the dollar are not new. In the 1970s, President Richard Nixon’s Treasury secretary, John Connally, once told foreign finance ministers that the dollar is “our currency, but your problem” after they complained about its inordinate sway on their economies.

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The Great Divorce

November 13, 2018

In October 2008, the Federal Reserve (Fed) changed from a “corridor” operating system for setting interest rates to a “floor” system. This poorly timed transition exacerbated the Great Recession and slowed economic recovery for years thereafter. So argues David Beckworth in “The Great Divorce: The Fed’s Move to a Floor System and the Implica­tions for Bank Portfolios.”
Corridor System Versus Floor System

Under the corridor system, there was an upper and lower bound within which the Fed’s target interest rate could move. The upper bound was the rate at which banks could borrow from the Fed (the discount rate), and the lower bound was zero percent. The Fed bought and sold securities through open-market operations to adjust its interest rate target within this corridor. The quantity of

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'Et Tu, John Williams?'

October 8, 2018

The Federal Reserve’s "r-star" has gone full supernova. New York Federal Reserve President John Williams, its key proponent, made clear in a speech late Friday that the neutral interest rate is no longer a guiding star for monetary policy. This means a federal funds rate in the range of what is considered neutral has no special significance as far as policy is concerned…

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More Non-Star Metrics for Monetary Policy

September 26, 2018

In an earlier post and Bridge article, I discussed some ways to use nominal GDP (NGDP) as a cross-check on the FOMC "navigating by stars" of r*, u*, and y*. The motivation for these pieces was Fed Chair Jay Powell’s concerns about the challenge of using these star variables when they seem increasingly in flux…
Continue reading: More Non-Star Metrics for Monetary Policy

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The Fed's Floor System: Sayonara?

September 26, 2018

Are the days of the Fed’s floor system numbered? Last month, I claimed that they could be if President Trump’s fiscal policy continues to spawn rapid increases in the issuance of Treasury bills. His administration is relying heavily on Treasury bills to finance its deficits…
Continue reading: The Fed’s Floor System: Sayonara?

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Adopting a "Keep it Simple, Stupid" Approach to Monetary Policy

September 12, 2018

One of the biggest challenges facing the Federal Reserve in recent years has been the apparent breakdown of the framework it uses to guide monetary policy. This framework is centered on the so-called ‘natural rate’ hypothesis, which is supposed to help the Fed avoid over or underheating the economy. Since 2015, the framework has not been working well and has created much confusion inside the Fed. Fortunately for the Fed, its problems can be solved with a KISS.
The Fed’s Failing Framework
The Fed’s framework is based on the values of the unemployment rate, the real interest rate, and real GDP that are consistent with a healthy economy operating at its full potential. These values are called the natural rate of unemployment, the natural real rate of interest, and the natural rate of output.

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Jay Powell’s Fed and the Right Monetary Policy Rule

August 3, 2018

As a new Fed chair, it remains to be seen where Jay Powell will ultimately take US monetary policy. One area, however, where he is already breaking with his predecessors is his open endorsement of monetary policy rules. This largely overlooked development is remarkable given the Fed’s past aversion to such rules…
Continue reading: Jay Powell’s Fed and the right monetary policy rule
Photo credit: Jacquelyn Martin/AP/Shutterstock

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Closer To OCA Criteria: Eurozone Or Dollarzone?

July 31, 2018

The Eurozone has faced a number of challenges in recent years to its monetary union, which David Beckworth catalogued in a recent article for the National Review. At Seeking Alpha, Beckworth asks a second question: does the United States more closely fit the ideal of an optimal currency area (OCA)? 
Read it here: Closer To OCA Criteria: Eurozone Or Dollarzone?

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Jay Powell’s Fed and the Right Monetary Policy Rule

July 30, 2018

As a new Fed chair, it remains to be seen where Jay Powell will ultimately take U.S. monetary policy. One area, however, where he is already breaking with his predecessors is his open endorsement of monetary policy rules. This largely overlooked development is remarkable given the Fed’s past aversion to such rules.
In his first testimony to Congress, Chair Powell said that the FOMC “routinely consults monetary policy rules” and that he “find(s) these rule prescriptions helpful.” He reiterated this point in his testimony last week. His warm embrace of their use was complemented by the separate publication of benchmark rules in the Fed’s monetary policy reports submitted to Congress and on the Board of Governor’s website.
Continue reading: Jay Powell’s Fed and the right monetary policy rule

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The Future of the Eurozone

July 27, 2018

When does it make sense for countries to form monetary unions like the EU? David Beckworth expands on his National Review article on the topic with a follow-up at Seeking Alpha.
Read it here: The Future of the Eurozone

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The Euro Zone Should Integrate or Separate

July 20, 2018

The Eurozone has faced obstacle after obstacle over the last decade: the financial crisis, the Greek debt crisis, and rising nationalism, to name a few. David Beckworth argues in the National Review that the only ways to overcome the Eurozone’s inherent challenges are to integrate or dissolve.
Read more: The Euro Zone Should Integrate or Separate

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Two Important Things We Learned from the Fed Chair Yesterday

June 14, 2018

As expected, the Federal Reserve raised its target interest rate a quarter of a percentage point on Wednesday. Its target range for short-term interest rates now sits at 1.75to 2 percent. The Fed also signaled that it will probably raise interest rates twice more in 2018 given what it saw as good health in the economy. That would put short-term interest rates at 2.25 to 2.50 percent by the end of the year.
Fed Chair Jay Powell reiterated the optimistic take on the economy during his post-Federal Open Market Committee (FOMC) press conference. He noted that the FOMC’s decision to raise rates is a “sign that the US economy is in great shape” and that “most people who want to find jobs are finding them.”
This optimism was also apparent in the FOMC’s projection that it would raise interest

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Macro Musings 106: Razeen Sally on Protectionism, International Trade, and China

May 14, 2018

Razeen Sally is an associate professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore and formerly taught at the London School of Economics. He is also the Chairman of the Institute of Policy Studies, the main economic policy think tank in Sri Lanka and a senior advisor to Sri Lanka’s Minister of Finance. Today, he joins the show to discuss the state of international economic affairs and how it specifically relates to Asia. Razeen explains why he believes the U.S. should stay engaged within Asia and also shares his thoughts on China’s demographic problem as well as the effects of the Trump administration’s increased protectionism.

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Macro Musings 105: David Andolfatto on Inflation and the Phillips Curve

May 14, 2018

David is the Vice President of the St. Louis Federal Reserve Bank, and has published widely in the field of monetary economics. He also writes for his blog, MacroMania, where he covers a multitude of economic topics. David joins the show today to discuss the economics behind the Phillips Curve, and to help provide a greater understanding of the debate surrounding it. They also discuss the mystery of low inflation in the United States, the excess money demand problem, and the important role debt plays within international monetary policy.

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Macro Musings 104: Jim Hamilton on Econometrics, Energy Markets, and Low Interest Rates

May 14, 2018

Jim Hamilton is a professor of economics at the University of California-San Diego and the author of Time Series Analysis, a popular graduate-level econometrics textbook. Today, Jim joins the show to discuss his work in econometrics as well as his research on the role oil plays in the U.S. economy. He also shares his thoughts on how oil will continue to shape the economy in light of the rise of clean energy. David and Jim also discuss recent U.S. monetary policy and why interest rates have been so very low.

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Macro Musings 103: Daniela Gabor on Safe Assets and Shadow Banking

May 14, 2018

Daniela Gabor is a professor of economics and finance at the University of West England at Bristol and a monetary economist. She specializes in shadow banking, capital markets, and transnational banking. Today, she joins the show to discuss her new paper, Chasing Unicorns: The European Single Safe Asset Project. David and Daniela also discuss merits of equity-based banking, elements of the shadow banking system, and Europe’s quest for a safe asset.

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Macro Musings 102: Morgan Ricks on Money as Infrastructure and Bank Regulations

May 14, 2018

Morgan Ricks is a law professor at Vanderbilt University. Previously, he was a senior policy advisor and financial restructuring expert at the U.S. Treasury Department where he focused primarily on financial stability initiatives and capital market policy in response to the financial crisis. Today, he joins the show to discuss his new paper, Money as Infrastructure, where he contrasts what he calls the “intermediation paradigm” of banking and the “money paradigm.” Morgan also shares his thoughts on the government’s role in money, the history of free banking, and current-day banking regulation.

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Macro Musings 101: Ioana Marinescu on Universal Basic Income

May 14, 2018

Ioana Marinescu is an assistant professor of economics at the University of Pennsylvania and a faculty research fellow at the National Bureau of Economic Research. Today she joins the show to highlight her work on the concept of a Universal Basic Income (UBI). David and Ioana discuss how a UBI would work and how it compares and contrasts with Milton Friedman’s related negative income tax proposal. They also discuss the economic and social effects of a UBI, some experimental evidence of the policy, and the political feasibility of such a program.

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Macro Musings 100: Ryan Avent, Cardiff Garcia, and Heather Long on Lessons from the Great Recession

April 2, 2018

Macro Musings is celebrating its 100th episode, and for this special occasion, we have an all-star panel of guests joining the show! Heather Long is an economics correspondent for the Washington Post and formerly was a senior reporter at CNN. Ryan Avent is a columnist for the Economist Magazine and author of several books including his most recent work, The Wealth of Humans: Work, Power, and Status in the Twenty-first Century. Cardiff Garcia is the co-host of NPR’s The Indicator from Planet Money and was formerly with the Financial Times. Today, they join the show to discuss the top economic issues and lessons in last 10 years since the Great Recession, and what predictions they’ve made that haven’t come true. They also discuss the current trends of stagnant wage growth, the economic

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Macro Musings 99: Edward Nelson on Money, its Role within Monetary Policy, and the Monetarist Legacy

April 2, 2018

Ed Nelson is a senior advisor at the Federal Reserve Board of Governors and formerly worked at the St. Louis Federal Reserve Bank and the Bank of England. Today, he joins the show to discuss his research on the role of money in business cycles. David and Ed also discuss nominal income targeting, Milton’s Friedman’s influence on monetary economics, and Australia’s successful monetary policy performance.

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Macro Musings 98: Noah Smith on Immigration Economics

April 2, 2018

Noah Smith is a Bloomberg View columnist and formerly a professor of finance at Stony Brook University. Today, he joins the show to talk about his journey into the economics blogosphere and some of his recent work on immigration into the United States. David and Noah discuss some of the false narratives surrounding immigration as well as the impact of immigration on native workers’ wages, labor markets, and the broader economy.

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Macro Musings 97: Kevin Hassett on Growth, Technological Change, and the Trump Administration’s Economic Policies

April 2, 2018

Kevin Hassett is the chair of President Trump’s Council of Economic Advisers, a former scholar at the American Enterprise Institute, a professor at Columbia University, and a Fed Economist. Kevin has also advised John McCain, George W. Bush, and Mitt Romney on their presidential campaigns. Today, he joins the show today to outline some of the big issues of the past and present facing the U.S. economy. Kevin argues that Obama administration policies exacerbated the sluggish nature of the recovery from the Great Recession and explains how he thinks President Trump’s policies on taxes, deregulation, and infrastructure will lead to stronger economic growth.

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Macro Musings 96: Brink Lindsey and Steven Teles on Rent-Seeking and the Twin Melees Afflicting the U.S. Economy

April 2, 2018

Brink Lindsey is the Vice President and Director of the Open Society Project at the Niskanen Center, and Steven Teles is a Professor of Political Science at Johns Hopkins University and a Senior Fellow at the Niskanen Center. Today, they join the show to discuss their new book, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality. For Lindsey and Teles, slow growth and inequality are “twin melees” that are harming the economy. They discuss some of the issues at the root of these problems, including excessive occupational licensing laws and zoning regulations, as well as some ways to fix them.

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Embrace of Monetary Policy Rule Strongest Ever by Fed Chair

February 27, 2018

Jay Powell went to Capitol Hill today for his first congressional testimony as Fed Chair. In addition, he submitted the Federal Reserve’s annual Monetary Policy Report to Congress.  A lot of ground was covered in his testimony, follow-up questions, and in the report. Here, I want to highlight one very interesting and potentially significant part of his testimony. And that is Jay Powell’s endorsement of monetary policy rules.
At the end of his written testimony, Jay Powell had this to say:
“In evaluating the stance of monetary policy, the FOMC routinely consults monetary policy rules that connect prescriptions for the policy rate with variables associated with our mandated objectives. Personally, I find these rule prescriptions helpful. Careful judgments are required about the measurement

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