Teaching, Writing and Talking About the Global Economy

The Two-Headed Central Bankista Coin

By Stephanie Kelton

Like all good Central Bankistas, Charles Evans (Chicago Fed) and Dennis Lockhart (Atlanta Fed) insist that if the Fed isn’t achieving its stated (employment and inflation) objectives, then it just isn’t doing monetary policy the right way. The flip side of the Central Bankista position is that whenever the macro data are more-or-less consistent with Fed targets, it must necessarily mean that central bankers have gotten it right. Nothing else, least of all fiscal stimulus/austerity, could possibly deserve credit (or blame) for whatever is happening at the macro level. It’s heads monetary policy succeeded, tails monetary policy failed. It also explains why Paul Volker’s policies are still widely credited for bringing an end to double-digit inflation, while President Carter’s deregulation of the natural gas industry (which finally brought energy prices down) doesn’t even merit a footnote in the textbooks.

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