This is a very good book for anyone interested in learning about the recent history of US monetary policies from the 21st century. Fair warning, the +16h can be a little overwhelming, but if you’re into history and finances, it can be quite an enjoyable read.

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I was highly interested in this book since I have been studying economics and monetary policy in particular for 6 years now. I enjoyed the insights into the history of the FED and learning about the decision-making processes throughout the decades. Bernanke also manages to cater to both the general and informed audience since he offers refreshers (or introductions) to concepts and then exploring them in more detail. However, I felt that this book could've been cut down a good 20%. From about the midway-point on, there is a lot of repetition, especially on the importance of communication of rate changes. Meanwhile, topics such as macro-prudential regulation and Modern Monetary Theory are addressed only very shortly. Therefore, I do not feel as though I gained enough new insights to justify the length of more than 500 pages.

Thank you to Netgalley and Recorded Books for providing me with the audio copy.

A fascinating peek behind the curtains of one of the most influential institutions in recent modern history. I enjoyed the insights in policy, and the many considerations this involves. But definitely not a book for anyone with a firm interest in economics
Good communication makes for effective policymaking

Definitely a good appetiser for any macro economic courses I'll follow later in the next two years.
Ben S. Bernanke describes the history of the Federal Reserve and the extraordinary measures taken in response to the financial crisis of 2008 and the COVID-19 pandemic of 2021. This also sheds a light on how central banks can use policy in the future to address challenges.

Goal independence versus policy independence is a first topic touched upon in 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19, on how politicians can use the independence of the central bank as a mechanic to take unpopular decisions.
Political appointees dominate, but these can’t be sacked for policy disagreements by the government.

Great inflation
The historic perspective starts post WWII, with 1952 till 1965 having an inflation which only averaged 1.3%. Between 1979-1980 inflation was at 13%. In our current times this is definitely interesting, and Bernanke describes the forces that contributed to this inflation.

1960’s Vietnam war spending and the introduction of Medicaid and Medicare increased government spending and demand. In 1972 the government initiated price freezes, which for two year were successful in reducing inflation, but which also dulled the market response to high prices
The difference, as also explained in this book, between supply and demand shocks seems hardly that defendable as we now see a price/wage spiral starting, based on supply shocks. Still it is interesting that the Philips curve of demand and prices interacting, leading to dual mandate of maximum employment (around 3%-4% unemployment being accepted and seen as “normal”) and stable prices, only emerged in the 1970's.

Also interesting is how fiscal and monetary policy being used in election years, and inflation being influenced by expectations of inflation. Politics hence influences monetary policies.
The dual mandate also introduces a battle between full employment and taming inflation, or between hawks and doves. Central bank president Volcker trying to control money supply instead of just using interest rates to enforce policies and control inflation.

Forward guidance and greater transparency (Good communication makes for effective policymaking) about expected interest rate developments and the view of the economy and risks being instrumental to get the market to respond to the desired goals of the central bank. Also a concept of probabilistic forecasting and easing more than the average scenario would require as an insurance against tail negative risks is interesting.

2008 financial crisis and beyond
50% of subprime loans being originated by companies under oversight of state regulator instead of the Fed.

How is the risk of central banks buying government bonds as government financing not mentioned?
Independence of central banks as a method to take political unpopular measures good for the long term economy is something Bernanke mentions.

Trade war of Trump costing $50billion in subsidies and being passed on to US consumers
Trump trying to tweet policies of the Fed

USD 2.4trillion asset purchases to prop up the American economy during COVID-19.

The Fed owning 37% of treasuries at the high mark of QE.
0.63% impact on interest rates of EU countries from QE by ECB.

Long term rate cuts being much more effective as a stimulant than short term rate adjustments since this targets mortgage and durable goods investments, which underpin the general economy and consumer confidence.

Estimated 1.25% lower unemployment and 0.6% higher inflation in 2015 due to QE

Neutral estimated interest rate 2.5% before inflation and QE, with an approximately 3.0% additional stimulus margin being available through extraordinary measures.

Overal an interesting, if technical book on how central banks work and impact the financial markets. The general goals are good, and the policies seem well thought out, but the amounts involved are staggering so no wonder many feel that the new directions central banks have moved into are uncomfortable. Bernanke tries to explain the rationale of measures and reflections on the efficacy of policies, which is commendable.