THE GREAT RECESSION

Since publication of Robert L. Hetzel’s he Monetary Policy of the Federal Reserve
(Cambridge University Press, 2008), the intellectual consensus that had characterized macroeconomics has disappeared. hat consensus emphasized eicient markets, rational expectations, and the eicacy of the price system in assuring macroeconomic stability. he 2008–2009 recession not only destroyed the professional consensus about the kinds of models required to understand cyclical luctuations but also revived the credit-cycle or asset-bubble explanations of recession that dominated thinking in the nineteenth century and irst half of the twentieth century. hese “market-disorder” views emphasize excessive risk taking in inancial markets and the need for government regulation. he present book argues for the alternative “monetary-disorder” view of recessions. A review of cyclical instability over the last two centuries places the 2008–2009 recession in the monetary-disorder tradition, which focuses on the monetary instability created by central banks rather than on a boom-bust cycle in inancial markets.
Robert L. Hetzel is Senior Economist and Research Advisor in the Research
Department of the Federal Reserve Bank of Richmond, where he participates in debates over monetary policy and prepares the bank’s president for meetings of the Federal Open Market Committee. Dr. Hetzel’s research on monetary policy and the history of central banking has appeared in publications such as the
Journal of Money, Credit, and Banking; the Journal of Monetary Economics; the
Monetary and Economics Studies series of the Bank of Japan; and the CarnegieRochester Conference Series. His writings provided one of the catalysts for the congressional hearings and Treasury studies that led to the issuance of Treasury
Inlation Protected Securities (TIPS). Dr. Hetzel has given