Friday, October 24, 2008

Of Monetary Policy and the Fed

Here are two resources worth your attention, particularly if you do the Fed Challenge. (HT to Greg Mankiw on both of these, by the way.)

The first is a post on Dr. Mankiw's blog showing charts from the St. Louis Fed. I expect (and fervently hope) that these spikes disappear in the not too distant future. But they are representative of what the Fed does in a financial crisis. You might want to have students also look at reserve positions at banks and fed funds lending activity.

The second is for when you and the team have been working hard and need a break and a laugh. (This should be particularly meaningful to those who were in the Seventh District Fed Challenge when I was still in Chicago.)

Are there negatives to using the video? I look forward to your thoughts.

3 comments:

Mike Fladlien said...

i don't understand the graphs...do they mean that the money supply is fixed and not growing or the money supply is increasing infinitely?

Tim Schilling said...

It's showing money supply growing very rapidly.

Anonymous said...

Tim, the Bernanke helicopter video made my day! I laughed out loud and sent it to all former fed challenge team members! We wear the "Be the helicopter" t-shirts with great pride, and I remember Bernanke's speech around 2003 when he referenced Friedman's phrase.
After that he was known as Helicopter Ben. It's good to laugh these days and it beats studying bank reserves and keeping up with all the new lending facilities! Put in proper context and the history explained, cancels out the CONS of using this.
Can't wait to have it playing when the kids come to class on Monday. They already think Bernanke is my hero--and wrote a screen saver message to that effect last year when we did Fed Challenge.