This week, we speak with Adam S. Posen, president of the Peterson Institute for International Economics. Over the course of his career, he has contributed to research and public policy regarding monetary and fiscal policies in the G-20, inflation targeting, European integration since the adoption of the euro, China-U.S. economic relations, and developing new approaches to financial recovery and stability.
Posen served as an economist in international research at the Federal Reserve Bank of New York (1993-94); He was an external voting member of the Bank of England’s Monetary Policy Committee (2009-12); and has been President of the Peterson Institute since 2013. In 1998, he was one of the co-authors of a book on “Inflation Targeting” with Ben S. Bernanke.
We discuss the failures that led to the great financial crisis, and he puts less blame on the Fed’s overly accommodative monetary policy and more on the malfeasance of Fed Chair Alan Greenspan radical deregulation. He cites his colleague Prof Michael Lussa of University of Chicago, who observed “Just as you don’t want a conscientious objector as a commandant of the Marine corps, you don’t want Alan Greenspan as the lead regulator of the US financial system.”
Posner explains the different impact of fiscal stimulus versus monetary policy has been. The Fed is more prophylactic in nature, and why they can work to prevent catastrophe, they cannot create prosperity by themselves.
In the last cycle, the Fed underestimated labor slack and were overly concerned with inflation rather than recognizing deflation. Add to that the failure of Congress to pass fiscal stimulus and you have a recipe for a slow weak recovery and increasing wealth disparity.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Penny Pennington, Managing Partner (CEO) of Edward Jones. The 98-year old Fortune 500 financial services firm has over 7m clients, with $1.3 trillion in assets and 17,000 financial advisors. Pennington is first non-family member to manage the firm; she is ranked #33 in Fortune’s Most Powerful Women in Business list.
Adam Posen’s Co-Authored Book
Inflation Targeting: Lessons from the International Experience by Ben Bernanke, Thomas Laubach, Frederic S. Mishkin, Adam S. Posen
Adam Posen’s favorite books
Austerity: The History of a Dangerous Idea by Mark Blyth
Globalizing Capital: A History of the International Monetary System by Barry Eichengreen
The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy by Stephanie Kelton
Books Barry Mentioned
Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed
The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us by Robert H. Frank & Philip J. Cook
End The Fed by Ron Paul