How the Fed can unwind
And its critics can relax

Federal Reserve/Flickr

Chairman Ben S. Bernanke speaks about creating resilient communities at the "Resilience and Rebuilding for Low-Income Communities: Research to Inform Policy and Practice" Federal Reserve System Community Affairs Research Conference in Washington, D.C., held on April 11-12, 2013.

Article Highlights

  • How will the Fed “unwind” its balance sheet — that is, sell off the bonds it has purchased — without harming the economy?

    Tweet This

  • How the Fed can unwind, and its critics can relax. @RameshPonnuru

    Tweet This

As the Federal Reserve has continued to buy bonds to aid the economic recovery, critics of its actions, and even some supporters, have grown increasingly concerned about what comes after all of this “quantitative easing”: How will the Fed “unwind” its balance sheet — that is, sell off the bonds it has purchased — without harming the economy?

The short answer: Don’t worry about it. The Fed can reverse its actions without wreaking economic damage, especially if it does it at the same time as it announces that it intends to keep nominal income growing at a stable rate.

The full text of this article is available by subscription to National Review.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Ramesh
Ponnuru

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Event Registration is Closed
Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.