MiB: Avoiding Crisis is Different Than Creating Prosperity

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MiB: Mario Giannini, Hamilton Lane


How different are the impact of fiscal stimulus and monetary policy? That is a question that Adam S. Posen, president of the Peterson Institute for International Economics has spent decades researching on behalf of central banks. Federal Reserve actions trends toward the prophylactic in nature, and while they can work to prevent catastrophe, they cannot create prosperity by themselves.

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. Over the course of his career, he has contributed to research regarding monetary and fiscal policies in the G-20, as well as public policy on inflation targeting, and developing new approaches to financial recovery and stability. In 1998, he was one of the co-authors of a book on “Inflation Targeting” with Ben S. Bernanke.

In the recent pre-covid cycle, the Fed underestimated labor slack and were overly concerned with inflation rather than recognizing deflation. The failure of Congress to pass fiscal stimulus post GFC was a recipe for a weak recovery and increasing wealth disparity. We discuss several of the failures that led to the great financial crisis, and the subsequent slow recovery: He puts less blame on the Fed’s overly accommodative monetary policy and more on the nonfeasance of Fed Chair Alan Greenspan as regulator. His colleague Professor Michael Mussa of the University of Chicago, 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.”

A list of his favorite books are here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyStitcherGoogleBloomberg, 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.

 

 

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