13. The Politicizing of the Fed

The U.S. Federal Reserve’s record since the end of World War II has been checkered at best. Along with some significant accomplishments have come considerable shortcomings. The central bank’s greatest achievements are these: First, under Paul Volcker’s leadership (see Chap. 4 ), the Fed broke the back of the virulent inflation that had plagued the economy for a decade and a half beginning in 1965. Had prices continued their upward spiral for much longer, our economy, and possibly our very social structure, could have suffered dire consequences. Second, under Ben Bernanke, the Fed—albeit belatedly—helped ameliorate the macroeconomic impact of the 2008 financial crisis. While it is true that Greenspan’s Fed policies contributed to the credit binge at the heart of the crisis, his successor acted innovatively to help ward off what likely could have morphed into a great depression. Indeed, monetary policymakers deserve considerable credit for the fact that the U.S. hasn’t suffered a major depression since the 1930s.