@DavidBeckworth
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Delighted to have Darrell Duffie join the podcast to discuss his work on the Fed's operating system and balance sheet. We cover a lot of ground including why QT cannot fully unwind QE, the role of an interbank market as a clearing mechanism for reserves, how liquidity regulations and payment-system design affect reserve management, how tokenized finance may reshape central banking, and more! @Austan_Goolsbee @annap_2013 @neelkashkari @vtg2 @NickTimiraos @colbyLsmith @senoj_erialc @ChrisGiles_ @conksresearchView quoted post on X
mercatus.org/macro-musings/…
At the end of her time at the ECB, Executive Board member @Isabel_Schnabel reflects on what she has learnt about monetary policy, sharing four key takeaways on the choice of tools, the response to shocks, fiscal and financial dominance, and implementation ecb.europa.eu/press/key/date…View quoted post on X
www.mercatus.org Darrell Duffie on the Fed’s Balance Sheet and the Changing Financial System Can the Fed shrink its balance sheet without disrupting financial markets? “Lars, who would you like as ECB chief?”
Christine Lagarde announced today that she will step down in February. The question came straight away. So I have gone through the field properly.
Let me be clear from the start – this is not a guess at who will get the job. It is my view of who the best candidate is.
My criteria are not about hawks and doves. I want a central banker who believes in rules over discretion and a clear nominal anchor. One goal – not five. Someone who says no to finance ministers, takes the money supply seriously and talks less.
With a little help from Claude, I screened 100 names and went through 32 in depth – 1,040 dated speeches, interviews and academic papers, all judged on the same criteria and by the same rulebook for everyone.
Rate decisions don’t count. Most of the candidates have never sat at a rate-setting table, so I measure how they think about monetary policy and what professional background they bring.
The winner is clear – Athanasios Orphanides.
34 statements for rules, 1 for discretion. He is the only candidate with a clear interest-rate rule of his own – tied to the growth of total nominal income in the economy.
Behind him come Axel Weber, Olaf Sleijpen, Jens Weidmann and Boris Vujčić.
The prediction markets see it differently. On Kalshi, Pablo Hernández de Cos is at 42% and Klaas Knot at 34%. On my ranking they come 7th and 12th – strong CVs, but mostly meeting-by-meeting discretion and a long list of extra tasks for the ECB.
The market is probably right about who ends up with the job. But if you ask who should have it, the answer is Orphanides.
PS. Orphanides has put forward a simple rule for interest rates, which he calls “natural growth targeting”. He wants the ECB to publish such a rule instead of deciding meeting by meeting. He will almost certainly not get the job. But whoever does could make a good start by announcing that the ECB will follow an Orphanides rule from now on.View quoted post on X
