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

Love people, not pleasure
image Oval Office lacks resolve on Ukraine
image Middle East Morass: A public opinion rundown of Iraq, Iran, and more
image Verizon's Inspire Her Mind ad and the facts they didn't tell you
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Event Registration is Closed
Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.