Pop stars and politicians pepper the Internet with selfies and bombastic tweets to grab attention. But in the narrower realm of economics, there’s a new social media star: the former president of the Federal Reserve Bank of Minneapolis.
Days after leaving the Minneapolis Fed late last year, Narayana Kocherlakota fired up a Twitter account and a bare-bones Google site.
He wrote that the powerful Fed committee that sets interest rates should consider cutting them to negative levels. He questioned the committee’s credibility. He said Congress should pass more economic stimulus. And he said today’s global economic problems have some parallel with those in the 1930s before World War II.
And that was just in the first week.
“Isn’t that amazing that he’s willing to say all these things outright?” said Miles Kimball, a University of Michigan economist. “He’s taking the plunge.”
After five years making speeches about interest rates around the Fed’s Ninth District, leaving a trail of disclaimers from Montana to the Upper Peninsula of Michigan, Kocherlakota is pioneering the role of former Fed policymaker as blunt Internet commentator.
“My messages haven’t changed that much,” Kocherlakota said. “My language may be a little more direct than it might have been as a Fed president. If you’re part of the team, then I think there’s a sense that you should be making things happen by working within the team first. And if you’re not part of the team anymore, which I’m not, it opens you up to be able to say things in a more direct fashion.”
Now installed at the University of Rochester in upstate New York, the 52-year-old said that as he and his wife drove east in late December, they discussed how he could publish his views on policy and get them in front of an audience. He started blogging and activated Twitter, which he had never used.
“I have to say I’ve enjoyed it tremendously,” he said. “It’s just a great way to interact with people. You learn a lot, and the 140-character limit just forces you to think a little more clearly about your own messages.”
Last month he signed on as a columnist for Bloomberg. Just as when he was at the Minneapolis Fed, Kocherlakota’s writing has focused on interest rate policy and Federal Reserve communication.
The ex-U professor distinguished himself in the Fed by shifting from a hawk to a dove on interest rates in 2012. He then became the most vocal proponent for low interest rates on the Federal Open Market Committee, where he was a voter last year.
With persistent weakness in the job market and inflation well below the Fed’s target of 2 percent, Kocherlakota believes the central bank should stop trying to raise rates according to a timetable and start acting according to its dual mandate — to encourage low unemployment and inflation around 2 percent.
Otherwise, he argues, no one will believe the Fed will uphold its inflation mandate, and too many Americans — especially working-age men — will continue to suffer.
Before he became president of the Minneapolis Fed in 2009, Kocherlakota kept a low public profile, teaching and publishing research. But the dramatic economic consequences of the 2008 financial crisis that led him to serve in the Federal Reserve system also alerted him to a public hunger for economic understanding. “There is an enormous appetite to know about the economy and about economics in the general public,” he said.
His successor at the Minneapolis Fed, Neel Kashkari, frequently communicates via Twitter, though his messages since taking the job in January have steered clear of Fed policy and economic controversies. Former Federal Reserve Chairman Ben Bernanke also writes a blog and some former members of the Bank of England monetary policy committee have become outspoken.
But Kocherlakota has gone further, faster than any former U.S. central banker.
On Martin Luther King Day, he pointed out that the economic plight of blacks does not come up in Fed discussions, and said race has been “underemphasized” in Fed deliberations.
Multiple times he has criticized Congress — for amending the Federal Reserve Act to require a former community banker to serve on the seven-member Board of Governors, and for not doing enough to stimulate the economy with fiscal policy, even if that means deficit spending or deficit tax cuts. Those critiques, which Fed presidents can make only obliquely, have been particularly satisfying. “I certainly like being able to talk about fiscal policy in a more specific and direct way,” Kocherlakota said.
He blogged twice about an article that U.S. Sen. Bernie Sanders wrote about Fed transparency. He offered a quick comment about the now-infamous speech in February in which his successor Kashkari floated the idea of breaking up the nation’s biggest banks.
Kocherlakota has also waded into debates on Twitter, including an extended, technical, good-natured back and forth with Kimball on why the economy isn’t growing more quickly, and a substantive exchange on Fed communication with CNBC economics correspondent Steve Liesman.
“You have the feeling he’s sitting at his computer, watching what people say and then responding,” said David Wessel, a former economics editor at the Wall Street Journal who is now at the Brookings Institution. “In that sense, it’s pretty unusual. I can’t think of anybody else who’s sort of gone that retail.”
Kocherlakota has set a brisk pace as a columnist for Bloomberg View, the op-ed apparatus of Bloomberg News, producing at least three columns per week.
Low interest rates, contrary to conventional wisdom, have actually been quite good for older Americans, he pointed out, and the prospect of China decoupling its currency from the dollar is a threat to the global economy.
“He’s very blunt,” Wessel said. “The Bernanke blogs are 2,000 words and it’s hard to find an incendiary quote in there. Narayana is much more quotable and that means he’ll be quoted more.”
While Kocherlakota has held off from arguing the Fed should definitely push interest rates into negative territory — something the banking industry would abhor — he has pointed repeatedly to the example of the Bank of Japan, which went negative with rates in late January, and advised that the Fed should at least signal such a course of action is possible.
“He has an important point to make and the media has started to focus on his writings, which run counter to those of the hawks on the Fed,” said David Blanchflower, an economist at Dartmouth and outspoken former member of the Bank of England’s monetary policy committee.
Kocherlakota will start teaching in Rochester in the fall, including an undergraduate course on money and banking. He still believes quality academic work lays the bedrock for monetary policy. He does see ways, however, to influence the economic debate that weren’t possible inside the Fed.
“It’s breadth vs. depth, I think,” he said. “If you’re on the Federal Open Market Committee, you have a lot of influence over the making of monetary policy, but your ability to influence the wider public policy debate is more constrained. That’s the trade you make.”