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.


10:15 AM

10:30 AM
Ryan Avent, The Economist
David Beckworth, Western Kentucky University
Scott Sumner, Bentley University

James Pethokoukis, AEI

12:00 PM

Event Contact Information

For more information, please contact Henrik Temp at [email protected], 202.862.5876.

Media Contact Information

For media inquiries, please contact [email protected], 202.862.5829.

Speaker Biographies

Ryan Avent is the economics correspondent for The Economist and the primary contributor to the economics blog Free Exchange. His work has appeared in The New York Times, The New Republic, Bloomberg, Reuters, The Atlantic, and the Guardian, among other places. Before joining The Economist, he worked as an economic consultant in Washington, DC. He is the author of the 2011 book “The Gated City.”

David Beckworth
is an assistant professor of economics at Western Kentucky University and former international economist at the US Department of the Treasury. He has done research on the measurement of monetary policy; the transmission mechanisms through which it works; and its impact on the global, national, and regional economies. He has published in various academic journals and is the editor of the new book, “Boom and Bust Banking: the Causes and Cures of the Great Recession” (Independent Institute, 2012). His blogging at Macro and Other Market Musings has been cited by The Washington Post, The New York Times, The Financial Times, The Economist, Fortune, Businessweek, Newsweek, Christianity Today, and other prominent blogs, and his popular articles have appeared in The New Republic, National Review Online, Investor’s Business Daily, and Barron’s.

James Pethokoukis
is a columnist and blogger for AEI. Previously, he was the Washington columnist for Reuters BreakingViews. Pethokoukis has written for many publications including US News & World Report, The New York Times, The Weekly Standard, Commentary, USA Today, and Investor’s Business Daily. Pethokoukis is also an official CNBC contributor. He has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, the McLaughlin Group, CNN, and Nightly Business Report on PBS.

Scott Sumner has taught economics at Bentley University for the past 29 years. He researches monetary economics, particularly the role of the gold standard in the Great Depression. Sumner has also researched liquidity traps and how monetary policy can be effective at the zero-interest-rate bound. His policy work has focused on the importance of expectations, particularly policies aimed at targeting expectations in futures markets. In 1989, Sumner proposed pegging the price of nominal GDP futures contracts. The 2008 financial crisis raised issues that related to all three of his areas of research, and drew him into the public policy debate. Since early 2009, Sumner has been writing posts at

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