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“There’s a strong case that the most important economic policy decisions of the past decade have been at the Federal Reserve. In the wake of the 2008 financial crisis, America’s central bank decided which troubled financial institutions would live and which would die, created a public option for short-term corporate financing, manipulated asset prices by creating artificial demand for various securities, provided an unlimited supply of dollars to some cash-strapped European nations (but not to others), and began deliberately suppressing economic growth in 2015, on the grounds that the U.S. could not sustain an official unemployment rate of below 5 percent without triggering runaway inflation.
All these decisions had profound consequences for the global economy; and that last one might very well have cost the Democratic Party the last presidential election by slowing economic growth in 2016.
And yet, the Fed’s policies attracted scant attention from the mainstream media or elected Democrats. An unthinking reverence for the central bank’s political independence kept the American public ignorant of — and unelected bureaucrats, unaccountable for — exercises of discretion that helped determine the availability of jobs, cost of credit, and distribution of wealth in the United States. Conservative Republicans may have been willing to threaten Fed governors with violence if they didn’t start fighting non-existent inflation — but liberal Democrats barely made a peep as Janet Yellen’s rate hikes needlessly jeopardized the job prospects of low-income workers (and Hillary Clinton).
Fortunately, the 2018 midterms brought some new Democrats to town. And the new generation is woke on monetary policy.
When Federal Reserve chair Jerome Powell testifed before the House Wednesday, Team Blue’s freshmen lawmakers posed some of the hearings most incisive questions.
Alexandria Ocasio-Cortez noted that over the past five years, the central bank had repeatedly suggested that unemployment could not fall much lower without triggering high inflation — only to see unemployment fall much lower without triggering high inflation.”
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