Mend it, don't end it: Revamping the Fed for the 21st century

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Event Summary

At an AEI event on Friday morning, three all-star economists discussed a new conceptual framework for the Fed called market monetarism, which would provide greater economic stability. David Beckworth of Western Kentucky University explained how the traditional view of the money supply is too narrow, arguing that a proper understanding would include all assets that investors would feel comfortable using as a store of value. When these assets are taken into account, said Beckworth, we see that there is actually a shortage in the supply of money, which is largely responsible for America's anemic economic recovery.

Scott Sumner of Bentley University then detailed how low interest rates for sovereign debt are actually a sign of tight rather than loose money. He also explained why nominal GDP targeting would increase certainty in the economy by providing a stable target and fulfilling the Fed's existing dual mandate of low inflation and full employment.

Ryan Avent of The Economist revealed how the Fed's historical record has been one of repeated failures followed by learning and improvements. He concluded by responding to the argument that the Federal Reserve should not exist at all, listing three reasons why an American central bank is necessary.

--Henrik Temp

Event Description

2013 marks the 100th anniversary of the legislation that created the Federal Reserve. But don't expect much of a celebration. America's central bank is under tremendous scrutiny from Washington to Wall Street to Main Street, blamed by some for contributing to the Great Recession and by others for undertaking a reckless — in their view — monetary experiment known as quantitative easing.
 
While most critics encourage either ending the Fed entirely or limiting its focus to inflation-fighting alone, there is another reform avenue: market monetarism. An update to the monetary-policy work of Nobel Laureate Milton Friedman, market monetarism could provide more economic stability and avoid future financial crises in pro-market, rules-based ways. Please join our panel of experts as they examine how the Fed can help boost the US economy and create more stable growth in the long run.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

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James
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Wednesday, August 27, 2014 | 3:00 p.m. – 4:15 p.m.
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Please join AEI for a conversation among several contributors to the new volume “Teacher Quality 2.0: Toward a New Era in Education Reform” (Harvard Education Press, 2014), edited by Frederick M. Hess and Michael Q. McShane. Panelists will discuss the intersection of teacher-quality policy and innovation, exploring roadblocks and possibilities.

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