My current thoughts on the stability of the monetary standard and the role of central banks in maintaining economic stability, drawing on historical and contemporary perspectives, in the form of discussions of papers by Athanasios Orphanides and by Mickey Levi and Charles Plosser during the 2024 Shadow Fed meeting at Chapman University. Orphanides has a proposal for monetary policy via a natural growth targeting (NGT) rule that is simple, robust, and operationally feasibility. I agree that the Fed needs to anchor its policy discussions around simple, widely respected rules to mitigate human and committee biases. But I have some serious questions. Levy and Plosser vastly prefer the 2012 “Statement on Longer-Run Goals and Monetary Policy Strategy” to the 2020 version.

My major differences spring from my different assessment of how the Covid plague depression was handled. I see the Federal Reserve’s late but rapid policy responses as, primarily, a desirable purchase of insurance against a return to the ZLB and subsequent severe economic downturns. Levy and Plosser do not. Perhaps I overstate what the just-past risks were and what the present and future risks are. But I think both seriously undervalue those risks.

And all of this is just rearranging deck chairs on the Titanic. Our big monetary-policy problem is the forthcoming nomination of Donald Trump as Republican Party presidential candidate. The Donald Trump who writes such incoherent and erroneous word-salad as:

Should not this be our focus? If, that is, we think our current institutional setup has any value at all? Do you want to spend the rest of your life depressed, waking up each morning with “how could I have been so feckless and reckless?”

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