The Romers’ retrospective on the Powell Fed is comprehensive. Re-grade the same eight years by nominal spending and the verdicts change, in both directions.
You are correct to callout any instrument rate metric. The correct ruler, however, is the modeled minimum inflation rate that woud have maintained full emploument of resources. (Or if you prefer, the mimimum NGDP rate).
"Their complaint is about pledges and reputations: the Fed vowed to hold until inflation’s return to 2 percent was compelling, inflation never compellingly returned, and the Fed cut anyway — five years above target, a price level up more than 20 percent"
That kind of pledge (resttement of its comittment to FAIT with S=2% PCE) is contingent on no new shocks. Trying to keep inflation at 2% (were it virtually was in erly 2025) in the face of the tariffs and deportationshocks woud have meant unemployment of resources as relative rices woud hav had more trouble adjusting.
Powell raised interest on reserves on 2/1/2020. The 1st qtr. of 2020 was already going to be negative based on November 2019 legal reserve balances. Reserves were driven by payments, total checkable deposits.
The Greenspan put used RPDs, reserves for private deposits - it didn't emphasize excess reserves.
Asset valuation prices are driven from the appraisal of loan collateral, and loanable funds, which depends upon Gresham’s law: “a statement of the least cost “principle of substitution” as applied to money: that a commodity (or service) will be devoted to those uses which are the most profitable (most widely viewed as promising), that a statement of the principle of substitution: “the bad money drives out good”.
in 2019 not only was the price level still below what 2% would have required, but infaltion isweld was below 2%
You are correct to callout any instrument rate metric. The correct ruler, however, is the modeled minimum inflation rate that woud have maintained full emploument of resources. (Or if you prefer, the mimimum NGDP rate).
"Their complaint is about pledges and reputations: the Fed vowed to hold until inflation’s return to 2 percent was compelling, inflation never compellingly returned, and the Fed cut anyway — five years above target, a price level up more than 20 percent"
That kind of pledge (resttement of its comittment to FAIT with S=2% PCE) is contingent on no new shocks. Trying to keep inflation at 2% (were it virtually was in erly 2025) in the face of the tariffs and deportationshocks woud have meant unemployment of resources as relative rices woud hav had more trouble adjusting.
Powell raised interest on reserves on 2/1/2020. The 1st qtr. of 2020 was already going to be negative based on November 2019 legal reserve balances. Reserves were driven by payments, total checkable deposits.
The Greenspan put used RPDs, reserves for private deposits - it didn't emphasize excess reserves.
Asset valuation prices are driven from the appraisal of loan collateral, and loanable funds, which depends upon Gresham’s law: “a statement of the least cost “principle of substitution” as applied to money: that a commodity (or service) will be devoted to those uses which are the most profitable (most widely viewed as promising), that a statement of the principle of substitution: “the bad money drives out good”.