YouSaid · the spoken record

Ben Bernanke

lines on the record: 24
first: 2019-08-13
most recent: 2019-08-13
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Talking about cuts rather than deciding Those cuts Concern just from the perspective of watching policy. That's not necessarily Pressure just in terms of the extent of my perhaps this Concerned in that environment Inflation at 1.6%”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Decisions To pressure from the White House, yes, you would be quite a bit more concerned. So I think quite a bit would still need to happen as far as the composition. Board of Governors That would be something to watch. And then in terms of actual decisions, right now this is a judgment call. Our view is We're not particularly concerned about inflation. To that, and we think the economy is doing fine. So”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Our chief economist Jan Hatsius also doesn't believe the Fed is responding to White House pressure directly, but he thinks that pressure might be influencing policy indirectly. Our view is that a cut is actually not called for, given the macroeconomic environment today, yet they are proceeding to cut. Does that in itself give you pause that independence is really under threat here, or do you just think Fed governors are focusing on different macro indicators that are leading them down this road?”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Views of monetary policy and how the economy can and should perform. That's part of democratic accountability. Just putting one or two people on the board with particular views doesn't change policy. Those people need to convince their colleagues that their way of looking at policy, that their analysis, that their prescription for policy is better than the prescription that was currently being followed.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“All the people that he's actually put on the board and actually nominated for the board have been very well qualified for their positions, including, in my view, the chair of the board, JPAL, but the other nominees as well. I think what's worrisome here is that he kind of woke up at some point to what the Federal Reserve was and how these nominees were behaving once they were on the board and could see that perhaps they weren't as consistent with his views as he wanted them to be. And so the people that he's discussed nominating have been much more in agreement with his particular views on monetary policy than the ones he's actually nominated. I think we shouldn't be surprised that a president would nominate people who were broadly in agreement with his or her”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“So the key question is, do we have any reason to believe that political pressure on the Fed and any potential erosion of its independence has actually seeped into policy decisions to date? Cohn doesn't think so and argues that even if Trump ends up nominating a couple more people to the Fed who share his policy views, that in itself won't necessarily change policy.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“The politician how to pursue their very broad mandate. I could give you examples of all four of those things going on across the world at the moment, been in India, a bit in Italy, a bit in continental Europe, a bit in the United States, also in Latin America, in ways some crude, some much more subtle, and I personally worry much more about the subtle ones, much more so than in the 1990s or even in the late 1980s.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Trust people or judges, but actually they're quiet allies of a particular president or prime minister. This happened in your country in the United States with Arthur Burns and Richard Nixon in the 1970s. Arthur Burns, his credentials as an economist, could hardly have been better. He was working for Richard Nixon. He was not working, as is well documented in the run-up to the 72 election. He was not pursuing the legal mandate given to him under the law, more difficult when it's disguised. The other technique is to change the law, change the mandate or the mission. So one extreme is repeal the independence. Well, you know, that's a clumsy hard thing to do that would have market costs. Another way of doing it is to give the central bank more and more functions to the point where no decent central bank leader would do other than”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“I don't so far at least think that it actually is a eroding the independence of the Federal Reserve because I think the people at the top of the Federal Reserve now and before are people that understand that they are independent under the law and they have duties to the law. But, you know, there are two broad ways of attacking central bank independence politicians. For each of those ways there's a crude way and a subtle way of doing it. So the first way is around people. And you can either try and get rid of people and appoint people who are at the edges of what will be usual for that kind of job. That's quite clumsy and tends not to work, actually. Much more prevalent, I'm thinking across time and across jurisdictions is to appoint people that look like regular central bankers or”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Tucker agrees that such open criticism can chip away at public support, but still thinks it's preferable to hidden pressure that's often more difficult to detect and therefore harder to resist. Are you worried at all that the current overt pressure from the White House on the Fed is undermining the Fed's independence and how unusual is this in your history in central banking?”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“The president's criticism hasn't changed the legal structure, the legal framework supporting Fed independence. Do you still have budgetary independence? Do you still have the chair and the members of the board fixed terms? You still have the reserve banks. But I do think legal framework rests on public support. And I am somewhat concerned that the constant criticism of not only the policy, but to some extent the character of the people making the policy, the intensity and the amount of criticism could over time undermine public support for Federal Reserve independence. So I think some concern is warranted at this point.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“I think it goes back to the global financial crisis and the fact that that crisis had its origins here in the United States and in particular in the housing market. I think that people look to the Federal Reserve to preserve financial stability. Financial stability was not preserved, so they do, at least in part, blame the Federal Reserve for the fact that we had such a severe crisis. A second point here is the crisis response. There is a myth in my view that the unconventional policies favored the rich relative to the poor. I don't think that's true, but I think that's out there. And then all these unconventional policies were slow to take hold to boost the economy back to full employment. Now it has gotten back there and past full employment, but it was a long, hard slog through a slowly recovering financial system.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“So, I think not actually there's something really valuable about central banks with clear missions that are insulated from day-to-day politics. The mission has to come from Congress or Parliament, but that we should limit their role rather than expect them to reinvent themselves when facing a new set of economic problems.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“That's what's played out in the United States. That's what's played out in Germany. And the cost is monetary policy and regulatory policy. It can't improve productivity growth or make the economy more dynamic or cure problems of inequality. These are things that only elected politicians can do. The central bankers have found themselves a bit trapped.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“I think the mandates have left them with little choice, and so I don't want to be overly critical of them as institutions, but there is a very nasty dynamic. Imagine there's a horrible crisis and you're the fiscal policymaker and I'm the monetary policymaker and we have a meeting and we decide that actually the best possible approach will be a mixture of fiscal policy and a mixture of monetary policy. I go back to my building. You have a meeting with your advisors and your advisors say there's going to be a lot of pain in the party, in Congress, amongst your backers. And you say, well, I see that, but I've got a way off the short-term political costs against the longer-term economic benefits. But what happens if I don't do anything and your advisors say, oh, the central banker will just do more? So you say, oh, okay then, let us not do anything very much for now. Let's have the central bankers do more.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“People say President Roosevelt. What faces do people associate now with the measures to get us out of the crisis and reform? In the United States, it's Ben Bernanke, Tim Geithner, and Hank Paulson. The relative invisibility of both presidents Obama and Bush two is extraordinary. I'm not making a partisan point. It applied first to Bush and then to Obama. They weren't out there in front explaining what was being done in the way that President Roosevelt did. Instead, we've all looked to my tribe of central bankers to not only execute the actions and make some of the big decisions, but actually be the public face of what was done. And that tells me that something rather extraordinary has changed in our societies over the past 50, 70, 80 years.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Far too much since the crisis. And the best measure of this is not so much what they themselves have done. It's the relative absence of the elected fiscal authorities. So not only in the United States, actually across the Western world, what face would people associate with the efforts, whether people like them or not, to get the Western world, the United States out of the Great Depression, and then reform the financial system afterwards, President Roosevelt. Now, I've asked that question in presenting the book many times, and I don't need to provide the answer. People say...”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Let me put it at two levels the level of high principle and then a much more practical way of putting it. The level of hyperprinciple... These independent central banks are now incredibly powerful agencies of government. They have quasi-fiscal powers. They combine them with lawmaking powers, which we call regulatory powers, but they're really lawmakers. And yet, we've got a rather thin set of principles about how they should fit into a constitutional democracy. And if you contrast that with a kind of rich understanding of how the judiciary fit in at one end of the spectrum or how the military fit in at the other end of the spectrum, I regard central banks as almost the third pillar of unelected power, and it's much less well articulated where the constraints are. Let me come down from 100,000 feet to the practical. Our societies, advanced economy, constitutional democracies have simply relied on central banks.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“I also spoke to Sir Paul Tucker, former Deputy Governor of the Bank of England. He agrees with Cohn that central bank independence is critical to maintaining stable inflation and a functioning banking system, but he argues that advanced economies have become too reliant on central banks to solve all of their problems since the global financial crisis, which leaves them vulnerable to political influence. In your recent book Unelected Power, you voiced some concerns about central bank independence. Can you give us some color on what those concerns are?”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Getting the economy back to full employment was subject to political criticisms with Republicans in particular, criticizing the unconventional policy. So it was really important during the recovery period that the Fed be independent to pursue unconventional policies in order to get the economy back to full employment. The second point I would make is just because inflation's been quiescent for the last eight to ten years doesn't mean it will always be quiescent. And I think I would be quite concerned that if Federal Reserve independence were badly compromised, that at some point down the road we're going to run into an inflation problem given the shorter time perspectives of the politicians.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“A lot of desire for central bank independence grew out of the 1960s and 70s, which were a very inflationary period in which monetary policy wasn't sufficiently focused on price stability and the Federal Reserve was subject to a good bit of political pressure to keep the focus on employment rather than price stability. So economists and politicians recognize that in order to get price stability and to get good performance of the economy over time, there needed to be some arm's length relationship between the technocratic central bank and the political process. Now you could argue that that came out of an inflation period that doesn't seem to be the problem now. The problem now is low inflation. I think there are two answers to that. One is even fighting the low inflation.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“That said, a primary argument for central bank independence historically was that central banks needed independence to credibly fight inflation. So I ask Cohen if independence was really as necessary today when persistently low rather than high inflation seems to be the bigger problem. Here's Cohen again.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“Think the importance of Fed independence is to have a group of people who are looking at the economy and analyzing the economy with respect to the long-run goals of economic policy, that is this maximum employment and stable prices. The problem with having a non-independent central bank under the thumbs of the politicians is the politicians have a much shorter time frame in mind than is consistent with achieving these goals. So the politicians are looking at the next election and their impulse, and we're seeing some of it today, is to step on the gas as hard as you can until the next election and then worry about the consequences later. So they've got a very short perspective that they're trying to sort of maximize their own re-election chance.”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT
“I want to start with some background on why central bank independence matters. To answer this question, I reached out to Donald Cohn. He was vice chairman of the Fed during the height of the financial crisis. Why is the independence of the Federal Reserve so important?”
2019-08-13 · Goldman Sachs Exchanges · Central Bank Independence · IDENTIFIED FROM THE TRANSCRIPT