Asked whether the Fed is truly independent, Appelbaum rejects the framing. Nobody is truly independent, and the Fed certainly is not: Congress sets its goals, the President selects its officials, and it is subject to political pressure through many channels. What it actually has is a degree of insulation allowing short-term decisions on technical grounds — and it thinks about politics anyway.

Congress sets the Fed's goals; the President picks its officials
Insulation buys technical short-term decision-making, not freedom
The Fed factors politics into the direction of monetary policy
It is very easy to overstate what independence means

“Not to act philosophical, but nobody is truly independent, and the FED certainly is not.”
Binyamin Appelbaum · 14:02

“But its goals are set by Congress, its officials are selected by the President, it is subject to political pressure in a wide variety of…”
Binyamin Appelbaum · 14:19

#federal reserve#independence#politics

Myth Buster31:27

A market is a regulated space, not a natural state

Ritholtz argues the problem is crony capitalism rather than markets going too far. Appelbaum calls it a false dichotomy: markets are constructed by humans, something obvious to ancestors who met markets as physically bounded town spaces opened and closed by a bell and governed by rules the town fathers set. Because markets are now pervasive, that understanding has been lost. He agrees markets are being impeded and distorted — but the corrective is to regulate wisely, not to free them.

Historic markets were bounded spaces with explicit human rules
Corporate concentration follows from abandoned antitrust enforcement
Non-competes and licensing boards are regulatory failures, not market failures
Friedman's error was trusting natural law where human laws are required

“what's important to understand about markets is that they are constructed by humans.”
Binyamin Appelbaum · 31:31

“The corrective is not to free the markets and return them to some kind of natural state. The corrective is to regulate markets effectively.”
Binyamin Appelbaum · 32:16

#markets#regulation#antitrust#capitalism

Hot Take· 4

Hot Take28:36

Economists promised efficiency, growth and democracy — and were wrong

Asked whether Friedman's ideology has run its course, Appelbaum is blunt. Economists said focus on efficiency and growth would follow, that inequality was not that bad, and that reliance on markets would strengthen democracy. Growth has slowed every decade, inequality is worse than understood, and democracy is strained precisely by market reliance. He argues the pendulum needs to swing back toward a real role for government — and hopes what replaces the economists' hour is not unfettered populism.

Three central promises — efficiency, benign inequality, stronger democracy — all failed
Friedman's ideas were necessary correctives carried far too far
The Business Roundtable's shift from shareholder to stakeholder value marks the turn
The open question is what replaces the economists' hour

“economists said, listen, if you focus on efficiency, it will increase growth. They said, don't worry about inequality. It's not that bad. They said, you…”
Binyamin Appelbaum · 28:38

“I do think we're at the end of what I call the economists our and the question now is what takes its place.”
Binyamin Appelbaum · 29:34

#inequality#markets#economics#populism

Hot Take35:23

Every generation of economists declares recessions solved

Asked why anyone should listen to economists who missed the financial crisis and missed widening inequality, Appelbaum concedes they are bad at forecasting — and notes with amusement that every decade prominent economists announce the problem of recessions has been solved, apparently without knowledge of all the identical prior claims. Ritholtz closes the segment with Joan Robinson's line about the real purpose of studying economics.

Each generation reproduces the claim that recessions have been solved
Most economists missed both the crisis and rising inequality in real time
The faith that economists can predict the future is badly misplaced
Joan Robinson: the purpose of studying economics is to avoid being deceived by economists

“is every decade, every generation of economists, you get some very prominent into economists, often more than one, announcing that the problem of recessions has…”
Binyamin Appelbaum · 35:55

“the purpose of studying economics is not to acquire a ready made set of answers to economic questions, but rather to learn how to avoid…”
Barry Ritholtz · 37:17

#forecasting#economics#recessions#humility

Hot Take38:39

Greenspan took an oath as chief financial cop intending not to do the job

Asked to name the Fed's heroes and villains, Appelbaum starts with the villain. Greenspan swore an oath as the nation's chief financial regulator while privately intending not to fulfil it — and worse, intending to stop everyone else from doing it either. Appelbaum finds few heroes, because groupthink on financial regulation made dissent nearly impossible; the people who raised alarms, like Brooksley Born and Raghuram Rajan, came from outside the prevailing consensus.

Greenspan took the regulator's oath with the intent of not meeting it
He also worked to prevent others from regulating
Groupthink made internal opposition at the Fed almost impossible
Brooksley Born tried to regulate derivatives and was slapped down

“Alan Greenspand took an oath to be what was essentially the nation's chief financial regulator. And he says that as he took that oath, he…”
Binyamin Appelbaum · 39:06

“because she had the wisdom to know that regulation was necessary and the courage to try to implement it. But both of those things were…”
Binyamin Appelbaum · 40:26

#greenspan#financial crisis#regulation#groupthink

Hot Take44:33

The 1990s harvested trees planted decades earlier and planted none

Appelbaum argues the 1980s boom is misremembered — adjusted for population growth, US growth has declined every decade since the 1960s, and the seventies grew faster than the eighties. The 1990s miracle was real but rested on earlier public investment in technology, infrastructure and education. Instead of paying it forward, the federal government cut exactly those things. The US has since fallen behind thirteen developed nations on the share of workforce with college degrees.

Population-adjusted growth has fallen every decade since the 1960s
The 1970s grew faster on average than the 1980s
1990s productivity was built on mid-century public investment
The US lost its college-degree advantage through disinvestment

“So I have a little bit of an unusual view of the Clinton era. I think it was a disaster for the American economy. I…”
Binyamin Appelbaum · 46:39

“adjusting for population growth, economic growth in the United States has declined in every decade since the nineteen sixties.”
Binyamin Appelbaum · 44:36

#growth#public investment#education#1990s

Explainer· 5

Explainer08:01

How the Fed went from deliberate mystery to constant communication

Appelbaum explains that forty years ago the Fed believed there was value in being opaque — no press conferences, no direct public communication, with intentions readable only in short-end bond prices. That flipped into an intellectual revolution in which communication itself became the policy tool. Today the Fed, its regional banks and its researchers push out a constant stream of speeches, releases and research.

The Fed once believed mystery had genuine policy value
Volcker had press access but never spoke directly to the public on television
Bernanke reframed monetary policy as the management of expectations
The volume of output now risks the message getting lost in the noise

“there was an intellectual revolution the FED at you know, forty years ago again really believed that there was some value and mystery that you…”
Binyamin Appelbaum · 08:01

“Ben Bernankie famously said that of monetary policy is communications is managing expectations.”
Binyamin Appelbaum · 08:14

#federal reserve#monetary policy#communication#transparency

Explainer15:13

Why the Fed cannot pull too far away from the pack

Appelbaum describes two dimensions of international constraint. Since the crisis the Fed has embraced a role as the world's central bank, with crisis-era funding programmes aimed at the global financial system rather than just US institutions. Second, too wide a gap between US and foreign rates pulls capital into treasuries, strengthens the dollar and hurts exports — which limited the Fed's ability to raise rates even when it judged the US economy ready.

Crisis-era Fed programmes funded the global system, not just US banks
A wide rate differential drags capital in and strengthens the dollar
A stronger dollar helps travellers and hurts exporters
Governor Lael Brainard has been the most vocal on international factors

“It is difficult to be raising rates when everybody else is cutting rates and standing still and buying bonds. You just you can't pull away…”
Binyamin Appelbaum · 16:08

“the FED has a responsibility for keeping money pumping, not just domestically but internationally is clearly a part of the sort of the modern era…”
Binyamin Appelbaum · 15:47

#monetary policy#global markets#dollar#interest rates

Explainer20:30

How the Fed's mission shrank to one number — and then grew back

Appelbaum traces the Fed from a 1960s institution run by financial market types and created to prevent crises, through Volcker and Greenspan narrowing its mission to inflation control on the theory that everything else would follow. Greenspan consequently ignored financial regulation — not because he thought markets were perfect but because he thought markets beat regulation. After 2008 that era ended, and Jay Powell became the first non-economist chair in half a century.

The Fed was created post-1907 as a backstop for banks, not an inflation manager
Volcker and Greenspan reduced the mission to inflation control alone
Greenspan believed markets outperformed regulation despite their flaws
Powell is the first non-economist Fed chair in fifty years

“Over time, that mission gets minimized, and so in the VOLCA and green Span eras the Fed's mission is transformed into inflation control, the one…”
Binyamin Appelbaum · 21:26

“It wasn't that he thought markets were perfect that often that's a bit of a caricature. What he thought is that markets were better than…”
Binyamin Appelbaum · 21:59

#federal reserve#inflation#regulation#history

Explainer33:11

Galbraith's warning: sound economics mirrors the needs of the affluent

Ritholtz cites Galbraith's line that what is called sound economics often mirrors the needs of the respectably affluent. Appelbaum agrees with qualification: economics and other disciplines end up explaining what rich people want, and shareholder-primacy theory was very dear to the shareholders funding economists. His example is a celebrated 1970s paper praising the corporation, footnoted as funded by Eli Lilly. His test is to look at the whole pyramid, not just the top.

Shareholder primacy was funded by the people it benefited
A landmark pro-corporation paper disclosed Eli Lilly funding
Economists may sincerely believe conclusions that serve their funders
Those at the top have the loudest voices and the most direct access to power

“What is called sound economics is very often what mirrors the needs of the respectably affluent.”
Barry Ritholtz · 33:19

“the confluence of those two things is what you get A lot of the time you get economists justifying the things that are best for…”
Binyamin Appelbaum · 34:26

#galbraith#incentives#shareholder value#inequality

Explainer51:05

Why the Fed was left as the only game in town

Appelbaum links the weak post-crisis fiscal response to Friedman's argument that monetary policy is the only effective lever — an intellectual foundation that was also politically convenient. He tracks the shift through successive editions of Samuelson's textbook. Left alone, the Fed cut to zero and bought bonds but was never going to succeed by itself. The UK's austerity made things worse, and he argues the US has fiscal space now to invest without needing MMT's stronger claims.

Samuelson's textbook editions chart fiscal policy's demotion from the 1960s to the 1980s
The Fed cut to zero and bought bonds because nobody else acted
UK austerity damaged growth, jobs and the polity
The US can borrow at low rates and would likely recoup wise investment

“So the Fed got left in this uncomfortable position where it was the only game in town.”
Binyamin Appelbaum · 55:46

“It is clear that the United States has fiscal space at present to spend more money, and if that money is spent wisely, it is…”
Binyamin Appelbaum · 57:10

#fiscal policy#austerity#mmt#quantitative easing

Story· 3

Story09:14

LBJ shoved a Fed chair against a wall for raising rates

Ritholtz raises a Times piece on presidents fighting their Fed chiefs long before Trump. Appelbaum recounts Lyndon Johnson summoning William McChesney Martin to his Texas ranch and physically shoving him against a wall for daring to raise rates. He traces the arc: the Fed was effectively an arm of Treasury during World War Two, presidents through Johnson, Nixon and Reagan pressured it directly, and only from the 1990s did presidents conclude that leaving it alone produced better outcomes.

Johnson physically confronted Fed chair William McChesney Martin over rate rises
The Fed operated as an arm of the Treasury during World War Two
Presidents from Johnson to Reagan issued direct instructions behind the scenes
The hands-off norm took hold only in the 1990s and is now reverting

“So that story is about President Lyndon Johnson summoning William mc chesney Martin, the chairman of the FED in the late nineteen sixties, to his…”
Binyamin Appelbaum · 09:14

“I do think that there was a change beginning in the eighties, but really taking hold in the nine nineties where presidents concluded that that…”
Binyamin Appelbaum · 10:06

#federal reserve#politics#history#independence

Story24:28

Milton Friedman talked Nixon out of the draft

Before the 1960s, economists were not in the halls of power — Roosevelt called Keynes an impractical mathematician, Eisenhower warned against technocrats, and the Supreme Court ruled economic evidence irrelevant. Appelbaum opens his book with the least-known example of the turn: Friedman persuading Nixon to end conscription and raise soldier pay. It is the first chapter because it set the pattern of economists shaping policy in domains nobody expected.

Roosevelt dismissed Keynes as an impractical mathematician
Friedman fathered the earned income tax credit
He convinced Nixon to move to an all-volunteer army
The episode set the template for economists' broader capture of policy

“So he's the father of the earned income tax credit. He's the guy who convinced Richard Nixon to end military conscription.”
Binyamin Appelbaum · 26:32

“President Roosevelt referred to John Maynard Keyes as an impractical mathematician.”
Binyamin Appelbaum · 24:52

#milton friedman#history#policy#nixon

Story46:55

The government made AT&T teach rivals how to build semiconductors

Ritholtz notes that the internet, GPS, satellites and semiconductors trace back to government research. Appelbaum adds a less-known detail: when AT&T invented the semiconductor, antitrust policy forced it to share the technology, and AT&T literally ran seminars in New York teaching competitors how to manufacture them. The same enforcement forced IBM to open up software, which created an opening for Microsoft. Nobody, he notes, is forcing Google to make room for the next competitor.

AT&T was compelled to train rival firms in semiconductor manufacturing
Antitrust policy aimed to stop monopolies capturing critical technologies
Forced sharing produced personal computers, Intel and the modern chip economy
That enforcement role is no longer being played

“when when when A T and T invented the semi conductor, the government forced it to share the technology.”
Binyamin Appelbaum · 47:27

“Nobody is forcing Google to make way for the next competitor.”
Binyamin Appelbaum · 48:15

#antitrust#semiconductors#big tech#innovation

Q&A· 1

Q&A17:59

What happens if negative rates reach America? Nobody knows

Ritholtz asks whether the US financial system — built on fractional lending, mortgages and money market funds assuming positive returns — could survive negative rates. Appelbaum says the same was said of Europe and Japan before they got there. Modern finance is predicated on the assumption that you get a return, and negative returns would require deep adjustment to the mechanics. His honest answer is that nobody knows.

Europe and Japan were also assumed to be incompatible with negative rates
Modern finance assumes a positive return as a structural premise
Negative rates would force adjustments in the mechanics of the system
The unprecedented nature of it is itself the source of the risk

“our understanding of modern finances predicated on the assumption that you get a return, and the idea that those returns are negative requires a lot…”
Binyamin Appelbaum · 18:38

“I think, you know, no one knows is the answer. It's a possibility that has to be unnerving because we've never been there before”
Binyamin Appelbaum · 18:49

#negative rates#monetary policy#risk

Takeaway· 1

Takeaway1:05:48

Journalism stopped being stenography — expertise is now the edge

Asked what advice he would give a young journalist, Appelbaum says the job used to be stenographic: transfer what important people said to readers with little intermediation. That changed. The priority now is expertise — knowing your subject deeply enough to illuminate it. He pairs it with the lesson from his own first banking story, where he got millions and billions confused, and an editor told him one small error costs the credibility of the whole piece.

Journalism has shifted from transmission to subject-matter mastery
The best journalists are well versed and careful about detail
Depth takes time but is a durable competitive advantage
A single small factual error destroys a story's credibility

“There's a real priority now on expertise. You really need to know your subject”
Binyamin Appelbaum · 1:06:16

“if you get one thing wrong, even if it's a small thing, the credibility of your entire story is lost.”
Binyamin Appelbaum · 1:04:11

#journalism#expertise#career advice#credibility

Frameworks in this episode

Separate the Goals from the Optimisation

Stocking the Fridge

The Representative Worker Barometer

Insights & moments

⚡Myth Buster· 2

The Fed is not independent — it is insulated