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J. Bradford DeLong
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This week, Project Syndicate catches up with J. Bradford DeLong, Professor of Economics at the University of California, Berkeley, and a research associate at the National Bureau of Economic Research.

Project Syndicate: One forgotten lesson of the Great Depression, you wrote last month, is that “persistent ultra-low interest rates mean the economy is still short of safe, liquid stores of value, and thus in need of further monetary expansion.” Since then, the US Federal Reserve has cut the federal funds rate – a move that you argued in March could either stave off a recession or drastically undermine the Fed’s capacity to respond to one. What steps should the Fed take to help encourage the former and prevent the latter? At a time of growing political pressure on the Fed, what approach is it likely to take?

Brad DeLong: Back in 1992, Larry Summers and I warned participants at the Fed’s annual symposium in Jackson Hole, Wyoming, that low inflation and high equity-return and bond-risk premiums did not play well together. Dealing with a typical recession had, historically, required that the Fed cut the federal funds rate by five full percentage points. A large recession would require even larger cuts.

How could macroeconomic stability be maintained in a world where the real federal funds rate was 3% at the peak of the business cycle and the inflation rate was 2% or less? It was a very good question then. It is an even better question today, when we are mired in what Summers calls “an era of secular stagnation”; the real federal funds rate tops out at just 1.5% at the peak of the business cycle; and the Fed is struggling to keep the break-even inflation rate (that is, investors’ inflation expectations) from falling to or below 1.5%.

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DeLong recommends

We ask all our Say More contributors to tell our readers about a few books that have impressed them recently. Here are DeLong's picks:

  • Manias, Panics, and Crashes

    Manias, Panics, and Crashes

    The renowned economic historian Kindleberger shows how the mismanagement of money and credit has produced financial upheaval over the centuries.

  • Essays in Persuasion

    Essays in Persuasion

    A collection of insightful essays and articles written between 1919 and 1931, intended for a general audience.

  • The Great Transformation

    The Great Transformation

    In this classic work of economic history and social theory, Polanyi analyzes the economic and social changes brought about by the Industrial Revolution.

From the PS Archive

From 2018
A year after Trump and his fellow Republicans rammed their massive corporate tax cut through Congress, DeLong pointed out that the policy had not fulfilled its promise – which the conservative economists who backed it always knew was false – substantially to boost productivity and investment. Read his commentary.

From 2013
Nearly three years before a political backlash by those who felt they had been “left behind” by globalization got Trump elected, DeLong pointed out that a reaction to sharply rising inequality in the US was overdue. Read his commentary.

Around the web

In a comprehensive overview of US economic history, DeLong explains how the Hamiltonian economic principles of pragmatism and experimentation have repeatedly worked. Listen to the podcast.

DeLong joins the debate over whether US Democrats should lean away from market-friendly stances and embrace progressive presidential candidates and policies like the Green New Deal. Read the interview.

DeLong argues that, at a time when there is very little room to loosen US monetary policy, the Fed should be buying recession insurance. But it is not. Listen to the podcast.

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