Austan Goolsbee on Central Banking as a Data Dog

What It Covers

Austan Goolsbee, Chicago Fed President, discusses his data-driven approach to monetary policy, the post-pandemic inflation debate between supply versus demand shocks, housing price puzzles, stablecoins, central bank digital currencies, and AI's potential productivity impacts.

Key Questions Answered

• •Post-Pandemic Inflation Analysis: Inflation began soaring when unemployment exceeded 6% and output was below potential, suggesting supply shocks drove inflation more than demand. When supply chains healed in 2023, inflation fell without the predicted recession, contradicting demand-only theories.
• •Housing Price Puzzle: House price inflation has exceeded goods price inflation by 5% annually for fifteen years pre-COVID, creating compounding affordability crises even in rural Iowa. Construction productivity has been negative for decades, with no clear explanation despite extensive research on regulatory impacts.
• •Stablecoin Risks: Stablecoins backed by treasuries create bank-run vulnerabilities similar to the free banking era of 1840s-1860s, which produced recurring financial crises and panics. The Fed must ensure payment system stability while avoiding retail customer service roles like password recovery.
• •AI Productivity Outlook: Recent productivity growth exceeds pre-COVID trends and concentrates in tech-intensive sectors, suggesting AI may follow the decades-long adoption pattern of computers. However, diminishing returns from larger datasets and computing power could slow improvement rates, similar to self-driving car predictions.