Policy Punchline

Alan Blinder was the Vice Chairman of the Board of Governors of the Federal Reserve System under President Bill Clinton. In this episode, we seek to answer questions on the Fed’s unprecedented actions in light of the COVID-19 crisis and their long-term implications, from whether the injection of liquidity is propping up the financial markets in unhealthy ways, to whether the lack of coordination between fiscal and monetary policies could potentially exacerbate inequality like after the 2008 financial crisis… We say that the Fed’s actions have been unprecedented because it not only pledged to buy an unlimited quantity of government debt, but also decided to support even some of the riskiest corporate bonds; it lowered the target rate to 0-0.25 percent and announced in the June FOMC meeting that it’s not even “thinking about thinking about raising rates…” Is the Fed well-equipped to mitigate the economic effects of a pandemic? In the process, how can we manage the public expectation so that the Fed is not bein