Transcript: Binyamin Appelbaum


The transcript from this week’s MIB: Binyamin Appelbaum, NYT’s Fed Editor, is below.

You can stream/download the full conversation, including the podcast extras on Apple iTunes, Overcast, Spotify, Google Podcasts, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.




VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: This week on the podcast, I have an extra special guest. His name is Binya Appelbaum. And he is quite the expert on central banks and their policy and the history of economists in America.

Both his book and our conversation is quite fascinating. It traces the pivot in American history from where economists are really part of a softer social science and not really thought of as a hard science and don’t have a whole lot of influence at most levels of — of government or the monetary apparatus to the point in — let’s call it the 1980’s where all of that changes, maybe even in the 1970’s where — where there was some influence on precedence and some major policies. And the past 50 years can really be thought of as the economist hour, how the economic class has — economists class has very much influenced public policy, politics, fiscal policy, just pretty much the entire of American society can trace a lot of what’s taken place to the economists and their influence, which appears to be coming full circle and starting to wane.

So I found this conversation to be absolutely fascinating as I did the book, and I think you will as well. So with no further ado, my conversation with Binya Appelbaum.

VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

My special guest today is Binya Appelbaum. He is the lead writer on business and economics for the editorial board of The New York Times where he has worked since 2010. He is the author of a new book, “The Economists’ Hour: False Prophets, Free Markets and the Fracture of Society.”

Binya Appelbaum, welcome to Bloomberg.

APPELBAUM: Thanks. It’s great to be here.

RITHOLTZ: Let’s start with your career. Where — where did you begin as a writer?

APPELBAUM: Out of college, my first job was at the Florida Times-Union in Jacksonville, Florida. I covered the newsbeat in a county outside of Jacksonville, the Newsbeat. And anything that happened was my problem, I had to write about it.

RITHOLTZ: So that includes crimes and — everything.

APPELBAUM: Crime, government, forest fires, county fairs …

RITHOLTZ: Oh, really?

APPELBAUM: … school board meetings, you name it. It was my problem.

RITHOLTZ: When did you first start focusing on economics and — and business?

APPELBAUM: After Jacksonville, I — I moved to the Charlotte Observer. And the managing editor called me in one day and asked me if I wanted to cover banking, and I was a little skeptical. But he told me, “Hey, you’re the new banking reporter,” so that’s — that’s how it began.

RITHOLTZ: Did you have any academic background or any training in this or did they just throw you in blind?

APPELBAUM: No, I didn’t really, I got thrown in blind. I didn’t know much about the subject at all. It was really — one of the things I love about journalism is the opportunity to learn and to study as you work, and so I had really was an immersion experience. I learned as I — as I worked.

RITHOLTZ: So what was the process like becoming — I’m looking for the right word, maybe it’s adept at covering banks because they’re kind of a squishy …

APPELBAUM: Yeah, sure.

RITHOLTZ: … group chipping down. It’s not the easiest topic to cover.

APPELBAUM: First story I ever wrote I didn’t get the millions and the billions straight, so there was — there was a learning curve for sure. It was fascinating. You know, Charlotte knows you as Bank of America and Wachovia or both there and — and warring with each other. And I was sort of the center of this rapidly growing industry, and it was completely fascinating to be there and to be writing about it.

RITHOLTZ: And now that’s become sort of the southern headquarters of the banking industry, hasn’t it?

APPELBAUM: Yeah, it really is. It’s a remarkable story how Charlotte came to be a financial center, a really Interesting story. But — but to be there in that financial center with all of these bankers sort of trying to figure out the path of the industry and innovating and competing, it was — it was an exciting place to be.

RITHOLTZ: So from covering banks in Charlotte, that’s not a giant leap to covering the biggest bank of all, the Federal Reserve. How did that transition happen?

APPELBAUM: So it basically evolve through the financial crisis. I spent a lot of my time in Charlotte writing about mortgages and — and the financial crisis went to the Boston Globe where I continued to do that, then came to the “Washington Post” the week that Fannie and Freddie were — were taken over by the government as the paper’s national banking reporter. And I covered the financial crisis for the next 18 months.

About two months after I got to the “Washington Post,” the paper sent my wife a box of chocolates with a note saying, “You know, we’re sorry you haven’t seen Binya recently. Maybe again someday.” So that was an intense period. And then I came to the “Times” in 2010 initially to cover financial regulation, but then was asked to move over to the Federal Reserve as — as Dodd-Frank came into law and — and those issues started to settle down a little bit.

So in 201, I basically began covering the Fed and monetary policy.

RITHOLTZ: And what was that like? All of a sudden, now you’re the “New York Times” reporter for the Federal Reserve. That must’ve been quite heady, a ton of access, I assume, to senior Fed people, governors and — and chairman and others. What — what was that like?

APPELBAUM: Yeah, you feel a — a real responsibility. I don’t know if I felt so much heady as — as sort of a little scared at first because a lot of people are counting on you to accurately represent what the Fed intends to do, what it’s communicating. And you do have a lot of access that the Fed takes very seriously its efforts to — to communicate and — and to convey its read messages. And one of the ways it does that, one of the primary ways it does that is through big media outlets like the “Times” or the Journal or Bloomberg. And it works very hard to explain itself to people like me, people in my job, and so yeah, you do get to spend a lot of time with the leading figures in monetary policy, talking to them, picking their brains, trying to understand what they’re thinking.

It’s frankly fascinating and — and it was really an interesting experience, particularly, you know, in 2011 when the Fed was in the middle of this sort of tumult and trying to figure out how to deal with a new set of economic circumstances.

RITHOLTZ: So this new transparency, as some have called it, is very much a sea change from what the world was like 40 years ago. There were no press releases. There certainly wasn’t a press conference. The Fed open market activity can effectively be seen and how prices, on the short end, of the bond market would move. That was pretty much the only way anyone had an idea that the Fed was doing anything. How different is it today than when they seem to be cloaked in — in mystery and secrecy?

APPELBAUM: So I wasn’t around back then, but I think that’s a big part of the change is how much the Fed is communicating directly with the public. If you go back 40 years ago, the person who had my job was still spending a significant amount of time with Paul Volcker, had access to him, was hearing his thoughts, had the opportunity to question him directly. But that wasn’t happening in a televised news conference.


APPELBAUM: Volcker wasn’t going out there and talking directly to the public on 60 Minutes or, you know, holding town hall forums or, you know, all these innovations in Fed policy that we’ve seen in recent decades. So part of what happened at the Fed as so many other institutions is they realized, you know, they could step out from behind the curtain and control their own communications and speak directly to their audience. And obviously, they’re doing that much more aggressively than ever before.

RITHOLTZ: I don’t recall Volcker tweeting a whole lot. That wasn’t — he wasn’t big on that, but …

APPELBAUM: Jay Powell doesn’t tweet either, so maybe that’s — that the next Fed chair will move on to Twitter maybe.

RITHOLTZ: But there are a bunch of Federal Reserve researchers. And if you — if you go through any of the regional Feds or the main Fed, there’s a ton of stuff — there’s a ton of content they generate that works its way into Twitter and the blogosphere and, eventually, in the mainstream media, so it’s not like the Fed is remotely quiet. They are very active in trying to communicate their messages.

APPELBAUM: And to be clear, there was an intellectual revolution. The Fed at — you know, 40 years ago again really believed that there was some value and mystery that you didn’t want to be too clear, that you didn’t want to tell the public exactly what was about to happen, and there’s just been the sea change. You know, Ben Bernanke famously said that 98 percent of monetary policy is communications, is managing expectations. That idea that the Fed’s primary job is to communicate and to communicate clearly is a new thing in the world. And they’re doing it in every way they can.

See, as you said, they’re on Twitter. Fed presidents wander around giving public speeches all the time. There’s a sense that some of this is a bit of a cautioning, and sometimes the message gets lost in the noise, but they’re trying. This is now clearly the goal in a way that it wasn’t in an earlier era.

RITHOLTZ: So your colleague at the “Times” wrote a fascinating piece in 2017. The headline was, “A President at War with His Fed Chief Five Decades before Trump.” The takeaway to me was, hey, presidents have been pressuring and arguing with Fed chairs for a long time, only they kind of did it quietly and behind closed doors. What — what’s your read of the battle between Trump and Powell, the President and the Fed Chair, and how different is this than previous relationships?

APPELBAUM: So that story is about President Lyndon Johnson summoning William McChesney Martin, the Chairman of the Fed in the late 1960’s to his Texas ranch and literally shoving him against a wall and yelling at him for daring to raise interest rates. Clearly …

RITHOLTZ: So I love — I love — our boys are dying in Vietnam because of you.

APPELBAUM: Yeah, yeah.

RITHOLTZ: Well, not really, but it certainly is. The President says that to you. It — it should get your attention.

APPELBAUM: And it did — and it did. So, clearly, you know, if you go back historically, the Fed was essentially an arm of the Treasury Department during World War II and, you know, presidents in that era clearly thought of the Fed is taking instructions from them and they were not afraid to issue those instructions. And through Johnson and through Nixon and even into the Reagan era, we have examples of presidents, as you say, behind the scenes but quite explicitly, directly in confrontationally putting pressure on the Fed.

I do think that there was a change beginning in the 80’s, but really taking hold in the 1990’s where presidents concluded that the things worked out better if you left to Fed alone. Not — not that they changed their mind about wanting the Fed to deliver the best outcomes, but that they were convinced that if you gave it a little bit of — of space, a little bit of independence, that would be better for the economy both in the medium-term and in the long-term.

And so there was less of that kind of communication. And I do think that we’re now seeing a reversion to an earlier pattern in which the Trump administration is, you know, emulating much earlier presidential administrations in — in sort of explicitly telling the Fed what it wants and pressuring the Fed to do it. And that’s something we have not seen in a long time.

RITHOLTZ: So — so I find this whole thing ironic for a couple of reasons. First, when he was a citizen, Citizen Trump was complaining that Yellen was keeping rates too low. She — he — I — I believe the — the interview was “she should be ashamed of herself,” which is kind of ironic because when her term came up for renewal, he decided not to reappoint her, probably the most dovish member of — of all the people on the Fed that he could have put as — as chair, and he put Clarida and Jerome Powell as — as Vice Chairman and Chairman. I’ve argued they are certainly more hawkish than Yellen. Is this now the Trump’s Fed or is this still an independent Fed?

APPELBAUM: I think it is an independent institution in part because Trump, as you say, was not hugely intelligent about who he picked to run. And if he had clear goals, if he wanted easy policy, he should have picked policymakers who agreed with him and instead …

RITHOLTZ: To be fair — to be fair, Yellen is short and he said she was too short.


People think I make that up when I say that.

APPELBAUM: No, no, it’s true.

RITHOLTZ: But he …

APPELBAUM: Yeah, he did.

RITHOLTZ: … said that and he said it — it wasn’t even behind closed doors, he said it publicly, which is kind of — kind of shocking. So he replaced the dove with — people have pushed back on me calling Powell a hawk. He certainly was more hawkish than Yellen. Is that a fair …


APPELBAUM: I think that is, but I would not call him a hawk. I think, you know, you don’t want to overstate and — and we’ve seen the Fed just cut rates. We have seen him, you know, talking about his commitment to — to drive down unemployment and — and to create jobs. I don’t think he’s anybody’s idea of a hawk. But it’s certainly the case that the — the easiest way to have continued to pursue easy policy under Trump would have been to keep Janet Yellen in place. It’s not, you know, and — and — and in the way that Trump made his early appointment, he certainly didn’t pick people who were particularly minded to cut rates. There are clearly voices on the Fed who want lower rates than Jay Powell.

And — and Trump, you know, has both, you know, bloviated publicly about how much he wants that. But then when he’s had the opportunity to do something about it, he has consistently not taken advantage of those opportunities.

RITHOLTZ: To be fair, you see Jerome Powell. He looks good in a suit. He’s got a full head of hair. He looks very chairman-like, and I suspect that those elements weigh heavily in a — a president who tends to be focused more on the optics and the television announcement moment and may not pay as much attention as he should to the specifics of the policies. Again, otherwise, he would have kept the diminutive stature at Yellen in place as chairperson.

APPELBAUM: It is clear that the President views himself as a casting director, yes.


RITHOLTZ: That’s a good way to discuss it. So you mentioned the independence of the Fed. Are they truly independent especially say what you will about Trump? He is very effective as a communicator. He is a very strong tactician, maybe not the world’s greatest strategist. But in terms of getting what he wants now, he seems to be pretty good at that.

APPELBAUM: Not that he likes philosophical, but nobody is truly independent and the Fed certainly is not. I think what we can say about the Fed is that it has been provided with a degree of insulation to allow it to make short-term decisions on the basis of technical considerations. But its goals are set by Congress, it’s officials are selected by the President. It is subject to political pressure in a wide variety of ways. It clearly thinks about politics as part of the considerations that inform the direction of monetary policy. It is very easy to overstate what independence means.

RITHOLTZ: We were discussing earlier some of the pressures on the Fed from the President and — and the impact that has on markets. Let’s talk a little bit about the pressure of the markets on the Fed. By all measures, the U.S. has the highest interest rates as a central bank and as a bond issuer in the developed world maybe in the entire investment grade world. How does that impact what the Fed does both — both market forces and what other central banks do.

APPELBAUM: I think there’s two sort of dimensions to this. The first is that since the financial crisis we have seen the Fed embracing a responsibility for being the world’s central bank. That was certainly true in the immediate aftermath of the financial crisis where, you know, a lot of the crisis are the programs that the Fed put in place to provide funding. We’re really about finding the global financial system more than about funding American financial institutions.

RITHOLTZ: Meaning the concern was, all right, we are starting to thaw here, but the freeze elsewhere can certainly reach back and send this back down the rabbit hole again.

APPELBAUM: Absolutely. And so, you know, this idea that the Fed has a responsibility for keeping money pumping not just domestically, but internationally is clearly a part of — of the sort of the modern era Fed and it’s thinking.

The other issue is that if you get too big a gap between the United States and Europe just as he does suggest it or between United States and the rest of the world, it starts to put pressure on both the Fed and the American economy. 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 that much from the pack.

And — and we’ve seen that tension play out in recent years where the Fed has said basically, listen, we think the American economy is ready to, you know, to detach and to start growing again. And the mere fact that the rest of the world was standing still ended up limiting the Fed’s ability to move rates north.

RITHOLTZ: So what we saw what happened was all this given the — the yield differential between investment grade treasuries and other sovereign investment grade papers, all this capital comes flying into United States …


RITHOLTZ: … to buy treasuries. It makes the dollar much — much stronger, which hurts U.S. exports, and — and it’s great if you go overseas and travel. But if you’re making products and you want to export them, it’s an issue. Does that forced the Fed to say, hey, we’re out of line with the rest of the world central banks?

APPELBAUM: I don’t think it’s, by itself, a sufficient factor to, you know, move policy, but it’s a — it’s clearly a consideration for some members of the Fed more than others. There are some — Governor Lael Brainard has been particularly vocal about her — you know, her interest in international factors and her belief that they should influence the course of monetary policy. It remains sort of an active debate inside the Fed how much attention you pay to these considerations, but there’s no doubt that it matters and that it is influencing the course of monetary policy.

And that the United States is part of — you know, the financial system is even more integrated than the global economy, and the Fed operates in the financial system. And to the extent that there is a divergence, as we’ve seen, between rates domestically and — and rates in the rest of the world, it clearly constrains the Fed’s ability to act.

RITHOLTZ: So — so let’s talk about that integration. That — that’s an interesting observation, the financial world much more integrated than the economy. When we look around internationally, Japan has negative interest rates, Europe has some very major countries with — with negative interest rates.

I have heard some people make the argument that the U.S. financial system is built on positive interest rates. Whether it’s fractional lending or mortgages or money market funds, we can’t sustain negative rates. Is that a concern at the Federal Reserve? What would they do if negative rates came to America?

APPELBAUM: It clearly is a concern. I think people would have said the same thing about Europe or Japan before they experienced, you know, negative rates. But our understanding of modern finance is predicated on the assumption that you get a return, and the idea that those returns are negative requires a lot of adjustments in the mechanics of the system …


APPELBAUM: … in the way that we think about the system, in the way that it functions.

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. And I think we just cannot anticipate all the consequences.

RITHOLTZ: So — so Ben Bernanke very famously apologized for some of the mistakes the Fed made way back when. I believe he was talking to Milton Friedman at the time. Is that right? How often does a central bank step forward and say, hey, we were wrong about this and here’s how it’s going to change us going forward?

APPELBAUM: That has been happening more lately. I mean, as part of this new era of transparency and clarity in communication, we have heard central bankers particularly here in the United States critiquing their own performance more publicly than those two in the past. And that’s an interesting change, and I think it’s helpful.

We heard Jay Powell last year explaining, you know, what he thought about the Fed’s actions over the previous year offering sort of in December a post mortem on the year that had been. That’s something that — it was unimaginable that Alan Greenspan would have delivered a performance like that, so it’s a new thing to hear central banks talking this way about their own performance. And frankly, I think it’s beneficial.

RITHOLTZ: I do recall Greenspan admitting that he discovered a flaw in his philosophy and some of the political cartoonists sort of showed him on the steps of the Roman Senate with everything in — in just rumbled destructive, crumbled pillars and it — it — it was just a mess. How significant was Greenspan admitting error? And did that have an impact on future Fed chiefs?

APPELBAUM: So if we’re going to step back for a moment, the Fed, you know, in the 1960’s was still run by financial market types. The Economist played a very limited role in the institution. The — the Fed was essentially a — a part of — of the financial system. And — and — and there were not people like Alan Greenspan in charge. And what you get over the succeeding decades is people like Paul Volcker and Alan Greenspan are elevated into positions of authority, and they see the mission of the central bank much more narrowly.

The — the Fed was created to prevent financial crisis. That’s why we decided to have a central bank.

RITHOLTZ: Post — post 1906 …


RITHOLTZ: … there was a big crisis, in large part, caused by capital flows from big insurers in the U.K. to the U.S. and back. And we were sort of operating with one arm behind our back if other countries have central banks and we don’t.

APPELBAUM: That’s exactly right. And so we decided to create this system to serve as a backstop for our banks. Overtime, that mission gets minimized. And so in the Volcker and Greenspan eras, the Fed’s mission is transformed into inflation control. The one thing it has to do is just keep inflation slow and steady, and that will guarantee financial stability. It will guarantee broad prosperity. It was like a magic pill. The idea was if you could just control inflation — and this comes from Milton Friedman — if you could just control inflation, everything else would fall into place.

And so Alan Greenspan — and he’s been quite open about this — basically ignored financial regulation. 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 regulation, that — that markets would do a better job notwithstanding their flaws than any human effort to regulate markets. And the results of that was a massive financial crisis. The Fed was so grossly indifferent to the misbehavior of the major financial institutions that we all ended up paying a significant price for that.

And so I think it was important for Greenspan to come before Congress and under pressure say basically, yes, I now acknowledge that when I said that financial institutions would be sufficiently self-interested, not to crash themselves, not to put themselves out of business, that I was wrong in the sense that institutions, like all of us, make bad choices and do things that are not ultimately in our long-term self-interest, and that a number of financial institutions behave so stupidly that they did put themselves out of business.

And he was saying …

RITHOLTZ: You know, Mitch …

APPELBAUM: … (inaudible) as far as that goes, right? I — I blew it. And I think the Fed, as a whole, has taken that lesson and said, “You know what, actually we do need financial regulation and actually our mission does need to be broader than just trying to control inflation.” And so this era in which economists sat at the Fed and focused on one number has come to an end.

Jay Powell is the first non-economist to chair the Fed in — in half a century. And he is part of this new era in which the Fed has said, okay, yes, we are responsible for financial stability. Yes, we are responsible for unemployment and we’re also responsible for inflation, but it’s not enough to just provide low inflation.

RITHOLTZ: So what about the fact that there seems to be a focus on risk assets as well. Is that really the proper role of a central bank?

APPELBAUM: I mean, the Fed — the Fed’s argument is basically that the Fed cannot perform its role without focusing on risk assets, that — that, essentially, if one of the things you’re trying to do is to maintain financial stability, you know, the risks to stability are going to come out of risk assets and — and you got to pay attention to them. And if you’re not paying attention to them, you’re not doing your job.

And — and, you know — I mean, there are clearly people who think the Fed should still be more narrowly focused, but you come out of 2008, you look around, you know, also — you know, the 2001 recession, the last two times we’ve been down this mountain, it’s because of financial stability issues. I don’t think there’s a pretty good case that the Fed does need to have, you know, a focus on — on risk assets.

RITHOLTZ: Let’s start with Milton Friedman. You said he had a greater influence on American life than any other economists. Explain.

APPELBAUM: So again backing up a little bit, if you go back to the mid-century, economists were not and it’s almost hard to convince people that how — that this is true, but they were not in the halls of power. Presidents did not take their advice. President Roosevelt referred to John Maynard Keynes as an impractical mathematician. President Eisenhower warned against allowing technocrats to run the government. The Supreme Court ruled that economic evidence was irrelevant. Congress took testimony from economists, but it didn’t take it particularly seriously.

There was this — this sense that economists were, you know, not particularly interesting or helpful. And — and, you know, places like the Federal Reserve didn’t have economists in positions of power. You know, places that are now essentially economic institutions, decisions that are now made by economists did not involve economists until surprisingly recently. And it was only really in the 1960’s and the 1970’s that economists begin to play a larger role in public policy.

And one of the foremost figures in — in the rise of The Economist is Milton Friedman. And what he’s really associated with is the idea that you’ve got this period of growth after World War II, it’s breaking down by the late 60’s, and Friedman comes forward and says, “The problem is that the government is overly involved in the economy.” We’re not trusting markets enough. We’re not allowing markets a sufficient scope to sort of, you know, allocate resources and produce growth.

What we need to do is get out of the way. We need to stop — you know, reduce government spending. We need to cut taxes. We need to roll back regulation. We need to, you know, have the Fed — he wanted the Federal Reserve be run by a computer program that would just, you know, increase the money supply at a slow and steady rate. He wanted to minimize policymaking. That’s what he thought was necessary.

And this was enormously influential. Much of the shift in public policy over the second half of the 20th century can be traced directly to Milton Friedman’s thinking in ways great and small. So he is the father of the earned income tax credit. He is the guy who convinced Richard Nixon to end military conscription. People don’t know this. It is a fascinating chapter.

RITHOLTZ: Which is a fascinating part of the book.


RITHOLTZ: It’s really quite fascinating and I was going through it. I think I understand who Milton Friedman is, and I’m reading this and saying to myself, “Wait, Milton Friedman convinced Richard Nixon to go to one all-voluntary army and raise the pay for — for soldiers?” That’s an amazing story.

APPELBAUM: It’s an amazing story and it’s the first chapter in the book because I think it’s such an amazing and little known story. And because it sets a pattern, it was really the first instance of these economists influencing policymaking in a — in an area you wouldn’t have predicted, but they then come from that into — into much broader power and — and, you know, they succeed in deconstructing the post war global financial system, the Bretton Woods system and replacing it with — with markets that exchange rates.

So across this whole waterfront of policy issues, if you look at what changed in the second half of the 20th century, you say, “Where did that idea come from?” A surprising amount of the time, the answer is that idea came from Milton Friedman.

RITHOLTZ: So interestingly enough, a lot of the ideas that he put forward seems to have come full circle and seems to be falling a bit out of favor. We’re recording this the week. The Business Roundtable announced that they’re replacing his concept of shareholder value that the sole purpose of a corporation is to maximize profits on behalf of shareholders with a concept that’s much broader stakeholder interests.

The idea that Breton Woods and a global system where there’s cooperation between different countries seems to be getting replaced with a form of economic populism not just here in the United States with the election of Donald Trump, you have Boris Johnson in the U.K. There are either all sorts of different people running. In Italy, in Spain, in Germany, there are a lot of issues as to that post war era that Milton Friedman influenced so much. Has his ideology run its course or is this just a little mean reversion?

APPELBAUM: You know, economists said, listen, if you focus on efficiency, it will increase growth. They said don’t worry about any quality, it’s not that bad. They said, you know, the more that we rely on markets the stronger democracy will become.

They were wrong about all of these things. Growth has slowed down in the developed world. Inequality has turned out to be a really big problem. We’re — we’re just learning how bad it is as the data piles up. And democracy is being strained precisely by our reliance on markets. So I think there’s a recognition that, you know, this revolution went way too far and that the ideas espoused by Milton Friedman, while they were necessary correctives to problems at the time, in some instances, were carried too far as is often the case, and that the pendulum needs to swing back away from market toward the recognition the government has a valuable and viable role to play in economic management, toward the recognition that inequality is a problem public policy needs to address.

I do think we’re at the end of what I call the economists’ hour. And the question now is what takes its place. And hopefully, the answer is not the kind of unfettered populism that we have seen in some countries, but if it’s not going to be that, it has to be something better than the old nostrums about, you know, trust the markets, everything will be okay because, in fact, everything is not okay.

RITHOLTZ: So I don’t agree with everything Milton Friedman said, although I’m fascinated by a lot of his work. The whole idea we don’t need an FDA. Sure, a few babies will die if the food or drug supply is poisoned, but companies will quickly protect the reputation, clearly absurd. However, the — the defense of Friedman could be it’s not that the market forces have gone too far, it’s that we have allowed a crony capitalism in a rentier system to come in where the markets are being replaced by people related or having a professional relationship with presidents, and governors, and mayors.

You look at what took place with the Amazon headquarters with New York, one of the biggest companies in the world. Why do you need tax credits when you’re not even paying taxes in the first place? And if we had a true market forces in place that this inequality wouldn’t have gone as far. My — my favorite example is if you own a football team, you don’t need me as a taxpayer to subsidize your for-profit stadium, stop being a socialist, go build your own stadium.

But you — you give some money to a governor’s race or a mayor’s campaign and suddenly you get $1 billion tax credit to build a stadium. How much of the pushback to the ideas of Milton Friedman is this sort of bastardized form of capitalism, this crony capitalism.

APPELBAUM: So I think it’s kind of a false dichotomy. I think, you know, what’s important to understand about markets is that they are constructed by humans. This would have been obvious to our ancestors who encountered markets as physically constrained spaces in the middle of town that operated at defined hours. The bell rang — they started a bell rang to end it.

RITHOLTZ: Literally.

APPELBAUM: Literally. And — and so markets, they understood that a market was something they had made that had rules that were laid out by the town fathers, and it couldn’t exist without those rules.


APPELBAUM: Markets are now so pervasive. We live in a marketplace 24/7, 365 and we’ve lost that understanding that a market is inherently a regulated space.

You’re absolutely right. We need markets and indeed much of what is wrong with our economy is that markets are being impeded, distorted, constrained, perverted. But that is not — the — the corrective is not to free the markets and return them to some kind of natural state.


APPELBAUM: The corrective is to regulate markets effectively. The concentration of corporate power is a product of the fact that we have abandoned anti-trust enforcement.

You know, the — the issues that we have, you know, with labor markets are — are a function of the fact that we allow corporations to prohibit workers from seeking jobs at other companies that we allow licensing boards to make sure that nobody can become a cosmetologist. You know, these are failures of the regulations, but the answer is not to do away with regulation, the answer is to regulate wisely.

And so the problem with Milton Friedman is that he made the argument that — that you could just trust natural law basically to take care of these problems, and we actually need human laws. We actually need effective — we need to make decisions as a society about what we — what we want markets to do, and then we can structure markets to achieve those goals.

RITHOLTZ: So — so let me go to a quote from the book where you — you cite John Kenneth Galbraith, and — and I’ve always been fond of this, quote, “What is called sound economics? It is very often what mirror the needs of the respectably affluent.” Explain that.

APPELBAUM: That’s a fascinating and a wonderful quote. I — I think Galbraith’s point — and it’s an important point — is that we often find that economics and other academic disciplines serve the interest of the wealthy and powerful. They end up explaining the things that rich people want. So, you know, the rise, for example, of — of the idea that corporations to be focused on maximizing profits for shareholders was obviously very dear to shareholders who had a lot of money to fund economists.

You know, there’s this wonderful paper from the 1970’s that is still regarded as, you know, one of the most important economic papers of all time. And what it basically says is corporations are the apotheosis of capitalism. It’s the best way to allocate resources between workers and capitalists. It’s great. What a wonderful system written by two very prominent economists. And at the bottom it says, you know, “This research was funded by the Eli Lilly Corporation.”


Well, yeah. I knew that Eli Lilly thought that. But, you know — and — and maybe those economists legitimately thought that, too, but 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 the wealthy.

I think, you know, Galbraith goes too far both in terms of, you know, saying that this is always the case and in terms of suggesting that economists are always doing it for the wrong reasons. There clearly are times when it’s — it’s a good thing for society as a whole. But you want to be looking at the whole pyramid. It’s not enough to just be, you know, writing policies that help the people at the top.

You want to know that the people at the middle and at the bottom also are benefiting, and that’s hard because the people at the top undoubtedly have the loudest voices, the most direct connection to the powerful people, the greatest ability to influence the course of policy. And they’ll stand there and scream all day that if you just keep cutting their taxes, growth will ensure. At some point, you know, you want to start asking questions about why economists are still willing to believe something that has been repeatedly disproved for 40 years now.

RITHOLTZ: So — so when we make fun of the economists at the Fed who have been wrong, really we should be making — pointing out that the entire economic class into all the economists, most of them didn’t see the financial crisis coming. Most of them failed to see, in real-time, the widely broadening economic inequality you mentioned. Why should we be paying much attention to economists if — if they’re so bad at forecasting the future?

APPELBAUM: And so first off, they are so bad at forecasting the future. I mean, one of the things I — I charted in the book just because it amuses me is every decade, every generation of economists, you get some very prominent economists often more than one announcing that the problem of recessions has been solved, right.

RITHOLTZ: It’s just permanently high plateau.


RITHOLTZ: That’s just a classic.

APPELBAUM: I mean, how is it that an economist can continue to make this claim with any knowledge of the history of the claims that have preceded their own. It just is mind-blowing the arrogance of these claims. But — you know, yeah, so economists have problems. It’s important to say that economists are also really good at some things.

Economics is a wonderful system for disciplining choice-making. It really helps you to think carefully about costs and benefits. It forces you to — to put into a system and to model the factors that you’re considering, the — the pluses and the minuses. It allows you to think systematically about choices. That’s great.

Where I think we go wrong is in privileging the views of economists about what the goals of policy should be. There’s no special reason to think that economists deserve a greater hearing on that subject than anyone else. We, as a society, can decide what goals we want to pursue and then economists have the genuine ability to help us get there. But this faith that they can predict the future is badly misplaced. And — and the credence given to their priorities, I think, is badly misplaced as well.

RITHOLTZ: My — my favorite quote from Joan Robinson is “the purpose is studying economics is not to acquire a readymade set of answers to economic questions, but rather to learn how to avoid being deceived by economists.” And it’s — it’s quite insightful.

Can you stick around a little bit? I have a ton more questions for you.

APPELBAUM: Yeah, absolutely.

RITHOLTZ: We have been speaking with Binya Appelbaum. He is a “New York Times” reporter on the Federal Reserve and the author of a new book, “The Economists’ Hour: False Prophets, Free Markets and the Fracture of Society.”

If you enjoyed this conversation, well, be sure and check out the podcast extras where we keep the tape rolling and continue discussing all things central bank-related. You can find that at iTunes, Spotify Google Podcast, Overcast, Stitcher, wherever your finer podcasts are sold.

We love your comments, feedback and suggestions. Write to us at

Check out my weekly column on Follow me on Twitter @ritholtz. Sign up for my daily reads at I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.


RITHOLTZ: Welcome to the podcast. Binya, thank you so much for doing this. This is a subject that I find quite fascinating. I think when we look at the list of people and institutions that were to blame for the ’08, ’09 crisis, I can’t help but think of Alan Greenspan is near the top of that list. It wasn’t just him, a lot of people did a lot of really silly things, which all came home to roost around the same time. But when you look at the Federal Reserve, who stands out as heroes of the institution and — and who do you think are underrepresented in that — that pantheon?

APPELBAUM: I — I want to start with the villain because you’re right, Alan Greenspan took an oath to be what was essentially the nation’s chief financial regulator. And he says that as he took that oath he had in mind that he did not mean it. And the fact that he was …


APPELBAUM: … willing to become the nation’s top financial cop with the intent of not doing the job, and — and worse than that with the intent of preventing everyone else from doing the job. I just think that even to the extent that people have held him culpable for what happened in 2008, there is still not a sufficient understanding of how bad and how devastating his conduct as Fed chair was for the American economy, so that’s number one.

As far as heroes go, I’m not sure there’s a lot of heroes at the Fed. The — the — the group think around financial regulation was so pervasive in those years that it was almost impossible to be a voice in opposition to the prevailing consensus.

Everybody knows this famous story about Brooksley Born who, as head of …


APPELBAUM: … head of the CFTC sought to regulate derivatives and was slapped down by who’s who of Washington dignitaries.

RITHOLTZ: Right. All men, all very much against regulation.

APPELBAUM: Absolutely. And — and, you know, she is — it’s such a remarkable story because she tried because she had the — the wisdom to know that regulation was necessary and the courage to try to implement it. But both of those things were in very short supply in Washington in those years.

It was mostly people outside of Washington, outside of sort of the conventional, consensus, outside of the economics community who were willing to raise their hands and say, “Listen, there are problems here.” And, you know, we’re all familiar with our people who follow this probably knows some of these names but Raghu Rajan is an economist, too …


APPELBAUM: … famously at the Fed’s conference in Jackson Hole stood up and — and said that, you know, maybe financial innovation was dangerous.

You know, there were people at the Fed, Ed Gramlich who, you know, raised concerns about the Fed’s unwillingness to regulate mortgage lending. There are instances of people who were willing to — to raise these questions. But, you know, it’s just — when we’re going to look back on and we’re going to say how did all these people come to believe this insane thing so wholeheartedly, so completely? How is it possible that they were all blind?

RITHOLTZ: Well, that’s easy. The history of humanity is the history of a series of beliefs and false things that some lasts longer than others, but ultimately are revealed as we become more knowledgeable and more experienced, and did I say more enlightened. The question is how long does it take for us to forget and backslide because that seems to happen every generation.

So let me talk to you about a few other people at the Fed that I think are quite fascinating. You mentioned the Johnson experience. I think it was Paul Volcker in his — so he has a new book out, but there was a bio he wrote — autobiography in the 90’s. And he — I — I hope I’m not getting this wrong, but he essentially describes getting called to the White House to the Map Room, and the Map Room is notable because there are no recording devices like there are in the Oval Office.

And I believe it was Baker and President Reagan. And with Reagan sitting there, Baker says to Paul Volcker, “The President orders you to cut Internet.” And Volcker smiles and nods and says, “How low do you want them or anyway?” And then proceeds to go back to the office and explains to everybody why rates are not only going to go higher, they’re going much higher. Otherwise, these idiots left in their own devices and have caused hyperinflation that will be terrible. So that was a fascinating admission.

What are your thoughts on — on Paul Volcker and his role within the Federal Reserve?

APPELBAUM: Paul Volcker is a seminal figure in the history of the Federal Reserve because he is the guy who implements this shift in the Fed’s approach to its job. Pre Paul Volcker, the Fed, like most central banks around the world, has a very broad conception of its economic responsibilities. It’s trying to minimize unemployment. It’s trying to, you know, play a role in currency markets. It sees a financial stability mandate.

And Volcker is the beginning of this period in which the Fed says, “No, we have one job. Our job is to control inflation, to stomp it out. We’re going to do that as hard as we can. That’s what the Fed does.” And — and he does that single-mindedly and successfully over the course of the 1980’s.

Reagan’s role in it is really interesting and a complicated story. There’s a lot of moments which Reagan is very supportive of Volcker. There are clearly times when — when he can’t take it anymore or at least his aides can’t. But — but that relationship aside, it’s very clear that Paul Volcker, you know, inaugurated a new era at the Fed a period in which economists who are making the decisions and — and their primary focus was on minimizing inflation.

RITHOLTZ: So is it safe to say that the economic boom of the 1980’s and 90’s traces in large part back to Paul Volcker as well as what do we come up on a 40-year bull market in bonds? How much of that is — can we give credit to Volcker for?

APPELBAUM: I think the bull market in bonds, by all means, make Paul Volcker the patron saint. As far as America’s prosperity in the 80’s and 90’s, I think there’s a couple of things that often get lost in that discussion. The first is that adjusting for population growth, economic growth in the United States has declined in every decade since the 1960’s. The 80’s is remembered as this period of rapid growth, but only because we had this sharp recession and then rebounded from it.

RITHOLTZ: The 70’s were — were not a period of expansion or growth it was stagflation.

APPELBAUM: But the economy grew faster in the 1970’s then it grew in the 1980’s.



RITHOLTZ: That’s …

APPELBAUM: Annual average growth in the 1970’s was higher than in the 1980’s. People look at the — the good years in the 80’s and they forget the Volcker caused a bunch of bad years at the outset.

RITHOLTZ: Eighty and ’82, sure.

APPELBAUM: And maybe that was necessary, too, to clear the way for renewed prosperity, but the renewed prosperity was not as good as what it come before it. So I think there is reason to wonder about our memories of that period.

The other thing that’s really important and this particularly becomes true in the 1990’s is that the 1990’s really reaped the fruit of earlier periods. The 1990’s happened because the federal government has invested massively in technology and had built a new industry, a new sector of the economy with public funding that have been turned over to the private sector to exploit and to realize, and that was great, and productivity rose and we had a genuine economic miracle.

But the basis of that miracle is the investment in earlier eras. And instead of paying it forward, what the federal government did in the 1990’s was to sharply reduce funding for the things that had worked previously so that we weren’t funding new technology, we weren’t funding infrastructure. And one of the really important ones that people miss is when you go into the 1990’s, the American adults who are coming into the workforce in those years, the rate at which they have college degrees is much higher than any other developed nation. We had a huge educational advantage during the 1990’s.

At present, we’re falling off a cliff. We’re now below like 13 other developed nations …


APPELBAUM: … in — in the share of workforce that has college degrees. We have lost that educational advantage.

How do we gain it? By massive public investment and public education during the mid-century. How have we lost it? By massive disinvestment in public education during the 1990’s since then.

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 think they basically harvested all of the trees that had been planted in earlier eras and forgot to plant any new ones.

RITHOLTZ: Quite, quite interesting. You know, when I look at that era of 80’s and 90’s, everybody immediately thinks to the Internet. But if you want to see some other government-sponsored programs or the outgrowth of NASA and — and the space race, semiconductors trace way back to — to that.

Everything on the computer side, everything mobile, all the GPS and satellites and any sort of communication that came out of that, all of that comes from original government research.

APPELBAUM: Absolutely. And another thing about semiconductors that people don’t know, which is very relevant to this conversation, when — when — when AT&T invented the semiconductor …

RITHOLTZ: Bell Labs, yeah.

APPELBAUM: … the government forced it to share the technology. AT&T literally held seminars where it invited its competitors, rival firms to come to New York for training in how to make semiconductors …

RITHOLTZ: Amazing.

APPELBAUM: … because the government, as part of its antitrust program at the time, was committed to ensuring that large corporations couldn’t monopolize important technologies. So it — it forced the showing of semiconductors and, you know, what you get from that is personal computers.

RITHOLTZ: Right, Intel and — anything where there’s a chip involved …


RITHOLTZ: … they think computer — cars are now the second largest consumer of chips, it’s incredible.

APPELBAUM: It forced IBM to share the ability write software. And one of the first companies to take advantage was a company called Microsoft. It forced Microsoft to like Google onto its machines. Nobody is forcing Google to make way for the next competitor. So, you know, once again, you you’ve got a role the government played for a long time and enforcing antitrust rules in — in making space for new companies that it’s no longer playing. It’s another example of this phenomenon.

RITHOLTZ: That is quite horrifying because nothing worse than eating your own — your own seed corn when it comes to that.

So — so you start the book, I have to come back to this because I find it fascinating. You start the block during Nixon’s presidency. Is that because of the shift that Milton Friedman represented or was it really where the post war period pivots towards the modern era?

APPELBAUM: It’s both things, right. So you see that this era, what the French call the 30 glorious years after World War II is coming to an end. Growth is faltering. Policymakers are casting about for alternatives for answers and the answer that they find Milton Freeman famously says that, you know, the way you convince policymakers is by stocking the fridge with options so that, you know, when they need something …

RITHOLTZ: Right, there it is.

APPELBAUM: … when they got there, they open the door, there it is and — and his ideas were there. And so, you know, beginning in the late 60’s, in the early 70’s really beginning in the Nixon administration, these ideas become influential and went to a new period in policy, a new period in economic history. And that’s really the focus of this book is the revolution that began in those years.

RITHOLTZ: That — that began with economists taking over the asylum, no longer technocrats or — or non-economic actors.


RITHOLTZ: I have to tell you I found the book to be a — each chapter is really very distinct and I found the book to be a very enjoyable read.

So one of the things that — that only tangentially gets discussed is the issue of fiscal policy and how it affects monetary policy. There is an argument to be made that following the ’08, ’09 crisis, there was a political response from the Mitch McConnell’s of the world, which was we don’t care so much about, you know, the country, we want to just make sure this President is a one-term president. He — he literally mentioned our job one is to make sure this president doesn’t get re-elected. And so the fiscal stimulus was really narrow, temporary tax cuts, temporary extension of unemployment benefits and a couple hundred billion dollars in shovel-ready infrastructure. The argument has been made following a crisis that size, this should have been a $2 trillion, $3 trillion, $4 trillion stimulus plan.

So the — so the first question is how much did the lack of physical response force a monetary response? And — and is that the role of the Fed? Is that the proper role the central bank should play?

APPELBAUM: Yes, so I mean, as we say, I think it’s well-documented that this was the Republican strategy politically speaking. It also reflected in economic philosophy. Again, it goes back to Milton Friedman that said monetary policy is the only effective lever for — for — for improving economic conditions, that part of his central goal in the mid-century was to convince policymakers to stop using fiscal policy to respond to recessions, to abandon the idea that government spending or tax cuts could help. He argued that that was always going to be damaging to the economy in the long run and, therefore, it should not be attempted in the short run. Monetary policy was primary.

And you can trace the rise of this idea through the — the famous, you know, the — Paul Samuelson, the great mid-century economist who dominated the market for economics textbooks. You know, it released a new addition every few years, and you can actually watch economic ideas evolve, the consensus, the mainstream wisdom is sort of charted in those books. And you can follow, you know, from the 60’s when Samuelson is saying fiscal policy is really important through the 70’s when he says, monetary policy is also important, into the eighties when he says, “Actually, fiscal policy isn’t important at all, only monetary policy is important.” That is the victory of Milton Friedman.

And so there’s the intellectual groundwork that’s laid to say basically, you know, government spending doesn’t actually help so we’re not going to do it. That’s politically convenient for the Republicans, but they also have this intellectual foundation that they can stand on in making that argument in arguing that, you know, the government should not do more. This was even more pronounced in Europe and even more harmful there. I think there’s no question that a greater fiscal policy response was necessary and would have been helpful.

RITHOLTZ: So you mentioned Europe. Look what took place in the U.K. where they forget fiscal stimulus. They went on full austerity. The argument is not only did it not help, it made the situation worse. It — it hurt the GDP there. It hurt job creation and, ultimately, led to some degree to the rise of — of populism and Brexit.

APPELBAUM: Absolutely. I mean, I think, you know, we’ve seen this — this denigration of government, this sense that government does nothing productive and that the best government is the smallest government is really problematic. It is clear that there’s such a thing as too much government. It is clear that spending can be excessive or wasteful that it can create problematic incentives. These things are all true, but it is also clear that you can have too little and that you can cut too much, particularly during periods of economic difficulty.

And — and Britain is living evidence of it. I mean, they have really damaged their economy, the viability of their polity, their future prospects. I would not want to be the parent of a young child in Britain right now.

RITHOLTZ: Really? That — that’s — that’s a serious statement. So what about here in the United States? We’re — we’re seeing fiscal stimulus but not in terms of government spending on infrastructure but rather in terms of tax cuts and reduce government role. How does that play out here relative to the E.U. or U.K.?

APPELBAUM: So tax cuts as an incentive, as a stimulus program, are kind of second best. And — and politically, they have been much more palatable and so we’ve tended to rely on them in recent decades. They help — they don’t help as much.

The Trump administration actually has increased spending, particularly on defense, pretty significantly. And that …

RITHOLTZ: How significantly? How much has the defense uptick actually been?

APPELBAUM: I don’t have the numbers in front of me, but — but government spending is — actually, if you look at the stimulus during the Trump years, the fiscal side boost in spending is pretty close to equivalent to the boost that you get from the tax cuts.

RITHOLTZ: Oh, really?

APPELBAUM: There’s been a big increase in federal spending. It’s gone a little bit under the radar screen, but it’s a big deal.

RITHOLTZ: We — we used to call that weaponized Kingseyenism (ph) I don’t know if people still use that phrase.


RITHOLTZ: But, you know, under Reagan a lot of money poured into the military, helped to bankrupt the USSR because their system wasn’t as efficient as ours.

APPELBAUM: Yeah. It’s a longstanding feature of our economy and — and it’s sort of a — a thing we can all agree to spend money on. It has some real utility, but it’s not as beneficial as building roads or building, you know, broadband infrastructure or investing in schools. It’s the second best kind of spending. A lot of the money goes overseas. A lot of it gets put into things like bombs that blow up and don’t leave anything positive behind.


APPELBAUM: It’s not the greatest way to spend money. It’s better than nothing …


RITHOLTZ: It’s not the interstate highway system in terms of …

APPELBAUM: That’s right.

RITHOLTZ: … generating a multiplier effect.

APPELBAUM: That’s right.

RITHOLTZ: So — so that — that’s quite interesting. So given the lack of — of fiscal stimulus, what is the role of the Federal Reserve in a post crisis era?

APPELBAUM: So the Fed got left in this uncomfortable position where it was the only game in town. The only people who are willing to do more to engage the — the needs of the economy were Federal Reserve policymakers, and so they threw everything they could at the problem not necessarily as quickly as they should have, but they cut rates to zero then they started buying bonds in large quantities. They were trying.

But the reality is that they were never going to succeed completely. They could not, by themselves, revive the economy. They did what they could. What they did was important. But I — I think one takeaway from this past decade should be that that, you know, fiscal policy turns out to be really important.

RITHOLTZ: So one of the more interesting and intriguing aspects of modern monetary theory, or MMT as it’s called, is that we could do an infrastructure build of a few trillion by having the Treasury issue infrastructure bonds to fund it, put it out there and then let the Federal Reserve use those bonds, purchase those bonds as their Q.E. and everybody is happy. The budget is balanced, the Fed is basically now in charge of fiscal and monetary policy. What are your thoughts on that?

APPELBAUM: So it’s not clear to me that there is a theory — a clear theory …


… in MMT or at least I haven’t encountered a consensus description of what that would be. But let me say this, 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 likely that we would recoup a return on that investment, that if we invest in infrastructure, if we invest in education, if we invest in, you know, these kinds of improvements that, over time, our economy will grow fast enough, you know, to make those worthwhile uses of public resources.

We can borrow at low rates right now. We’d be well-advised to do so. I don’t think you need to necessarily wander into some of the more extreme claims of MMT to accept that basic set of premises about what is possible and desirable at present.

RITHOLTZ: All right. So — so I’m going to throw a curve ball at you right now because what you just said jogged my thought process. One of the nominees for president tags you and say — and says, “I really want to shake things up.” What should I say to the American public about infrastructure spending, about us reinvesting in our future and about teeing up the rest of the — the 21st century? As — for America, as an economic leader, what advice would you give that person?

APPELBAUM: I’ll say two things about that. The first is that a lot of Americans find themselves looking with envy at the success of, you know, Asian countries that have managed rapid economic growth in recent decades. A very important thing to know about that is that those countries took the recipe from the United States.

We invented this formula. We invented this formula of investing in domestic manufacturing, investing in education, growing in industrial base, cultivating export industries. These were American innovations, and — and they have spread to the rest of the world and been used successfully by other countries. The lesson of recent decades is that that type of investment, that type of concerted effort is productive and beneficial if it’s well-managed. And so I think, you know, we need to get back to the things that have worked for America in the past.

You know, if you look at our golden age in the mid-century, it had a lot to do with the way that government policy was managed and — and we do well not to go back to that in its entirety because there are problems with it and it broke down, and it’s important to recognize that it did so, but there are some valuable lessons there. But this is a little bit of avoiding the question, but let me tell you my barometer for a presidential candidate.

The American — the iconic American worker is not a steelworker today, it’s — it’s a woman who’s providing home health care services for an — for an aging baby boomer. That is the rapid — that’s the most rapidly growing sector of employment. That is the identity of the American blue collar worker. And the question is what are we doing to improve their life because they are making something very close to minimum wage.

They work under horrible conditions. They don’t have benefits. They don’t have vacation time. They’re easily fired and replaced. Their life is not what it should be. They are not living the American dream and they have an opportunity to live the American dream. And so for me, the standard for any presidential candidate is what are your policies going to do to improve the life of a 45-year-old home health care worker because that person is the person who needs our help right now.

RITHOLTZ: Quite fascinating. So let’s jump to our favorite questions that we ask all of our guests, sort of our speed round. Let me jump right into this. What was the first car you’ve ever owned, year, make and model?

APPELBAUM: I don’t know what year it was. It was a — an old Ford Escort — red Ford Escort that my father gave me when I graduated from college. It had been his commute car and I inherited it and drove it until it was total.

RITHOLTZ: Tell us the most important thing people don’t know about the Binya Appelbaum.

APPELBAUM: Wow, the most important thing. I don’t even know how to answer that question.

RITHOLTZ: How about your mentors? Tell us who your early mentors were.

APPELBAUM: You know, I was really lucky to work for some great editors and to work with some great colleagues at the Charlotte Observer. That’s why I think I really grew up as a journalist and so my editor there are Patrick Scott and Ted Mellnik who is the data guy there who I collaborated with on a series of projects. I — I really feel like, you know, I learned journalism and — and grew up as a person in Charlotte. And so I’m — I’m indebted to the folks I worked for and — and worked with at the Observer.

RITHOLTZ: Any particular authors or journalists who influenced your approach to covering the Federal Reserve?

APPELBAUM: Covering the Fed specifically, I mean, I — I think Greg Ip is kind of the gold standard in our era. I think his — his understanding of monetary policy and his clarity as a journalist are — are just things that I admire enormously.

RITHOLTZ: And on full disclosure, he took me to task for calling Jerome Powell a hawk. I really should have said Jerome Powell is more hawkish than Yellen. She is not — he is not a pure hawk. So, Greg, here’s your mea culpa live and in public.

Everybody’s favorite question, tell us some of your favorite books. What do you read be they Fed or economics-related or not fiction or nonfiction?

APPELBAUM: So I — I read a lot about, you know, the Fed and monetary policy but, you know, that’s not necessarily the most enjoyable stuff that I read. I love history. You know, I — I — my approach to — to writing deeply influenced by historians like Daniel Boorstin and Fernand Braudel who — who saw, you know, economics and history as integrated.

I’m — I’m very frustrated, in general, that historians pay very little attention to economics and that economists pay very little attention to history. So people who work at the intersection of those things to see the connections to understand how much history has been shaped by economic forces who understand how much economics exists in the historical context. Those to me are — are the people that I admire and love reading.

RITHOLTZ: Give us some book titles. Everybody wants a good book recommendation.

APPELBAUM: Well, you know, Fernand Braudel wrote this series of three books say — yeah, the wheels of commerce maybe is the first of them. You can find them, but they’re basically is history of — of Europe’s rise into the modern era, just fascinating books that — that integrate economics and history in a way that, you know, at the time was unprecedented and remains deeply influential. So I — I love those books.

Daniel Boorstin’s trilogy on the American experience, just a wonderful history of — of the United States that again has this capacity to tell our story much of what is so innovative and important about America is its rise as a commercial power and a commercial innovator. And he really captures that aspect of the American experience in a way that I think most historians failed to do.

RITHOLTZ: Tell us about a time you failed and what you learned from the experience.

APPELBAUM: But I already mentioned my — my inability to get millions and billions straight in my first banking story. You know, in general, I think — you know, again if you go back to Charlotte, you know, the importance of making sure that all the factor writing a story is something that, as a young journalist, I didn’t do. I didn’t have a high enough batting average. And, you know, I had an editor who told me, you know, if you get one thing wrong even if it’s a small thing, the credibility of your entire story is lost. And — and understanding that and internalizing that was — was a very important step in — in my development.

RITHOLTZ: What do you do for fun to either relax or get out of the office? What do you do when you’re not in front of a computer writing?

APPELBAUM: I — I love reading. I — I guess that’s probably already clear. I like running. I have two young kids and I love spending time with them. That’s pretty much a full life.

RITHOLTZ: With regards to the Federal Reserve, what are you most optimistic about today and what are you most pessimistic about?

APPELBAUM: So I think that the Fed has undergone a really important evolution in recent years, that it has embraced a broader set of responsibilities, that it seems to recognize that, you know, it can’t simply pursue lower inflation without regard to the consequences for American workers, that it can’t ignore financial regulation without regard to consequences for all of us. That’s really important, and — and I’m optimistic that the Fed is going to move forward, you know, with those things in mind and that that will give it a better chance of producing good results over time.

On the flip side, you got to be a little concerned about the Fed’s room for maneuver. Rates are very low while the economy is growing. There’s not much room to cut rates when the next downturn comes. You know, they can do some bond buying, but, A, not totally clear how much that helps and B, you know, there are limits on that, too. I think there’s a reason to be worried about the Fed’s capacity to help if things go south and reason to be worried about the willingness of — of fiscal policymakers to step in.

RITHOLTZ: What sort of advice would you give a millennial or a recent college grad who was just starting their career and interested in either journalism or central bank and economic coverage?

APPELBAUM: So if you’re specifically interested in — in writing about business and economics, I think one thing that has changed in journalism in recent decades is that it was once the case that — that journalism was much more stenographic. Your job was to sort of transfer the things that important people said to your readers with relatively little intermediation.

There’s a real priority now on expertise. You really need to know your subject. And so if you know what subject that is, you will serve your cause by — by studying it and trying to master it and becoming deeply versed. The — the best journalists, the ones that I follow most closely, the ones who most regularly illuminate issues for me tend to be really — not just really smart but really well-versed in their subject, really careful about the details. And that’s hard and it takes time, but — but it will give you a competitive advantage.

RITHOLTZ: And our final question, what is it that you know about the world of finance and central banking today that you wish you knew 25 or so years ago when you were first getting started?

APPELBAUM: Yeah. I mean, I guess, you know, one thing you learn as we get inside any system is how much of it is a little random, how much of it is — is sort of arbitrary, and — and things that you assume must have sort of a clear and logical explanation. It turned out to not — not actually operate that way. So just — I think to, you know, have understood that this is true, just adulthood in general. You think that there’s a reason for everything and — and then, you know, you become an adult and it turns out that a lot of things just happen so.

RITHOLTZ: Just randomness, it’s out there.


RITHOLTZ: Quite, quite interesting. We have been speaking with Binya Appelbaum. He is a Lead Writer on business and economics for the Editorial Board of The “New York Times” and the author of the new book, “The Economists’ Hour: False Prophets, Free Markets and the Fracture of Society.”

If you enjoy this conversation, well, have a look up an inch or down an inch on Apple iTunes, and you could see all of the previous 250 or so podcasts and interviews we’ve done over the past five years. We love your comments, feedback and suggestions. Write to us at Feel free to go to Apple iTunes and give us a review if you enjoyed this conversation.

I would be remiss if I did not thank the crack staff that helps put this together each week. Michael Batnick is my Head of Research. Atika Valbrun is our Project Director. Michael Boyle is my Producer.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.



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