George Selgin on Monetary Policy and the Great Recession

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4.7 • 4.4K Ratings

🗓️ 14 December 2015

⏱️ 69 minutes

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Summary

Did Ben Bernanke and the Fed save the U.S. economy from disaster in 2008 or did the Fed make things worse? Why did the Fed reward banks that kept reserves rather than releasing funds into the economy? George Selgin of the Cato Institute tries to answer these questions and more in this conversation with EconTalk host Russ Roberts. Selgin argues that the Fed made critical mistakes both before and after the collapse of Lehman Brothers by lending to insolvent banks as well as by paying interest on reserves held at the Fed by member banks.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty.
0:09.2	I'm your host, Russ Roberts, of Stanford University's Hoover Institution.
0:13.7	Our website is econtalk.org, where you can subscribe, comment on this podcast, and find
0:18.7	links and other information related to today's conversation.
0:21.7	You'll also find our archives where you can listen to every episode we've ever done
0:25.8	going back to 2006.
0:28.2	Our email address is mailadycontalk.org.
0:30.7	We'd love to hear from you.
0:35.9	Today is November 23rd, 2015, and my guest is George Selgin, senior fellow and director
0:42.8	of the Center for Monetary and Financial Alternatives at the Cato Institute, and Professor
0:47.2	Emeritus of Economics at the University of Georgia.
0:49.6	George, welcome back to Econ Talk.
0:51.4	Oh, thank you, Russ.
0:53.1	It's great to be back.
0:54.3	Now, this conversation is going to draw on a lengthy blog post you made at Alt M, the
0:59.2	blog that discusses monetary policy during and after the Great Recession.
1:04.7	And you start by talking about the trade-off between preventing a financial meltdown at any
1:10.0	particular time and the challenge of moral hazard.
1:13.8	What is that trade-off?
1:15.3	Well, very simply, it's a choice between allowing firms to fail, particularly banking
1:23.8	firms, but not just banking firms, and taking the risk that their failure will cause problems
1:31.8	for other firms and perhaps lead to subsequent failures as opposed to allowing, rescuing them
	...

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