The 2008 financial crisis and the COVID-19 pandemic greatly expanded the Fed’s scope and power. As the bright line between monetary and fiscal policy fades, and the threat of fiscal dominance increases, a robust discussion of the Fed’s future is warranted.
The nation’s central bank, made up of a group of unelected experts, is coming under increasing pressure to go beyond its narrow mandate to achieve long-run price stability and maximum employment. Progressives would like to use the Fed for fiscal purposes and by-pass the democratic process to have the Fed directly allocate credit and get involved in climate change and racial equity. Such intrusions into fiscal space and politics risk harming the Fed’s independence and credibility.
Populism and the Future of the Fed features highly readable essays that provide a broad perspective on core issues—including the populist challenge to Fed independence, fiscal dominance and the return of inflation, the limits of Fed power versus the expansion of its dual mandate, and the strange world of helicopter money and fiscal QE.
The distinguished contributors to this volume address these issues in a clear and compelling manner that will help improve both policymakers’ and the public’s understanding of the complex relationship between politics, policy, and the rule of law. Moreover, they provide different perspectives—legal, philosophical, historical, theoretical, and ethical—in reflecting on the role of the central bank in a democracy.
Populism and the Future of the Fed
Praise for the book
“Populism, whether left or right, is short-termist. Central banking is about the long-term economic and political benefits of monetary system stability. Read this book to help make sense of the Fed’s wobbles.”
— Sir Paul Tucker, Author, Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State, and former Deputy Governor, Bank of England
“This book brings together some of the greatest thought leaders and monetary policy scholars to examine exactly how the Fed is being politicized and what that means for our economy.”
— Jeb Hensarling, Former Chairman, House Financial Services Committee
“These beautifully written, jargon-free essays provide a much-needed and careful assessment of the Fed’s future following the 2008 financial crisis and COVID-19. Both events created populist demands for a host of new discretionary actions. The challenge is to restore a Fed with more limited power that follows well-understood rules and procedures.”
— John B. Taylor, Professor of Economics, Stanford University
“This superb volume brings together a broad array of experts to probe key challenges facing the Federal Reserve today. The authors take stock of Fed power and performance in the wake of two global crises and offer excellent insights into economic, social, and political pressures that will continue to weigh heavily on the Fed in the years to come.”
— Sarah Binder, Senior Fellow, Brookings Institution
Contributors
Raghuram Rajan, Barry Eichengreen, Charles Goodhart, Rosa María Lastra, John H. Cochrane, Carola Binder, Christina Parajon Skinner, Robert C. Hockett, Mark Sobel, Fernando M. Martin, Karen Petrou, Otmar Issing, David Beckworth, Scott Sumner, Charles Plosser, William Nelson, Frances Coppola, Kevin Dowd
About the Author
James A. Dorn is vice president for monetary studies, senior fellow, and director of Cato’s annual monetary conference. He has written widely on Federal Reserve policy and monetary reform, and is an expert on China’s economic development. He has edited more than ten books, including The Search for Stable Money (with Anna J. Schwartz); The Future of Money in the Information Age; Monetary Alternatives: Rethinking Government Fiat Money; Monetary Policy in an Uncertain World; Populism and the Future of the Fed; and China in the New Millennium. His articles have appeared in the Wall Street Journal, Financial Times, South China Morning Post, and scholarly journals. He has been a columnist for Caixin and Forbes.com. From 1982 to 2022, Dorn served as editor of the Cato Journal. He was a member of the White House Commission on Presidential Scholars (1984–1990), and a visiting scholar at the Central European University and Fudan University in Shanghai. He holds a PhD in economics from the University of Virginia.