21st Century Monetary Policy: The Federal Reserve from the Great Inflation to Covid-19

... light on personal anecdotes and devoted to substantive judgments. This exercise of historical assessment from a central participant is one that more policymakers should probably try. It allows readers to make judgments along with Bernanke and think about what lessons today’s policymakers — who are once again battling inflation — might take ... Even in his restrained style, Bernanke offers criticisms ... The one area where the book would have benefited from more introspection is economic inequality, which Bernanke largely dismisses as beyond the Fed’s mandate. Although he is correct that the central bank cannot solve the problem, it does have relevant tools, like its influence over financial markets, bank regulation and the housing sector. Instead, by treating stagnant working-class living standards as a sideshow, the Fed has contributed to the rise of populist anger that Bernanke laments ... Even with these caveats, 21st Century Monetary Policy tells a success story, and deservedly so ... Anybody reading his book today, during the Covid-19 pandemic, may notice that its message applies to more than monetary policy ... intended to help future generations of economic policymakers, and it probably will. But they are not the only ones who would benefit from thinking about its lessons.

In a world where $2.15 trillion is floating in the U.S. economy, readers will be intrigued by the history and predictions Bernanke shares. This impressive and accessible book will appeal to historians and educators as well as those who want to understand America’s finances from a historical perspective.

Unfortunately for Bernanke, however, his book arrives just as this new framework is being put to the test, with an inflationary spiral taking hold, an economic slowdown on the horizon, and tech and crypto bubbles starting to burst ... You can tell from its title that this is not a book aimed at the bestseller list. Half is given over to a history of Federal Reserve policy from the Johnson administration to the present. That is followed by a remarkably accessible but unavoidably wonkish discussion of the extraordinary steps taken by the Fed and other central banks in the wake of the 2008 financial crisis and then again during the recent pandemic ... Anyone looking for the score settling, mea culpas and juicy anecdotes usually found in books by Washington insiders will be disappointed ... Indeed, one of the weaknesses of the book is that Bernanke cannot seem to bring himself to say anything critical about any of his Fed colleagues — or, for that matter, any of his predecessors or successors — or the insular Fed culture that remains smugly dismissive of critics and dissenters, overreliant on its economic models and willfully ignorant of the machinations on Wall Street ... even though it is more than a decade since he left the Fed for a research sinecure at the Brookings Institution, Bernanke clings to the obfuscating and euphemistic language of the central banker ... Particularly unconvincing is Bernanke’s assertion that the expansionary monetary policy he supports does not favor the rich or significantly contribute to income inequality ... Bernanke’s analysis betrays a surprisingly shallow understanding of the dynamics of inequality in the 21st-century economy ... In the coming months, the Fed will try to rescue this strategy with a series of sharp rate increases and gradual withdrawal of bank reserves, moves that it hopes can tame inflation without throwing the economy into recession. If the Fed succeeds in engineering such a 'soft landing,' Bernanke’s book could see a second printing as it becomes the go-to text for courses in monetary policy...But if the strategy fails, the result is likely to be an extended period of uncomfortably high inflation and uncomfortably high unemployment...In that event, the most likely place to find a copy of 21st Century Monetary Policy will be the remainder bin of your local bookstore.