Ben S Bernanke: Teaching and Learning about the Federal Reserve
Remarks by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal
Reserve System, at a Teacher Town Hall Meeting "100 Years of the Federal Reserve",
Washington DC, 13 November 2013.
* * *
Thank you for that introduction. Tonight marks the third time in just a little over three years
that the Federal Reserve System has hosted a teacher town hall, and I am very pleased to
have this opportunity to speak with educators, both those of you here in Washington, D.C.,
and those watching at Reserve Bank gatherings around the country. I look forward to your
questions in a few moments. But let me begin by briefly discussing an important milestone
for the Federal Reserve - its centennial - and the opportunity that this occasion affords to
teach and learn about the Fed's origins, history, and role, and about how this institution has
helped shape the nation's economy and financial system.
President Woodrow Wilson signed the Federal Reserve Act, which established the Federal
Reserve System, on December 23, 1913. As the 100th anniversary of that event
approaches, we have several reasons to look back at an eventful century. One important
reason is to better understand what historical experience can teach us about how best to
respond to current challenges. For example, as many of you know, the bold measures the
Fed took in response to the recent financial crisis reflected in part its determination to avoid
repeating the sorts of mistakes it made before and during the Great Depression of the 1930s.
Similarly, our commitment to safeguarding price stability is reinforced by memories of the
costs of high inflation during the 1970s and the Federal Reserve's subsequent restoration of
price stability under Chairman Volcker during the 1980s.
Beyond the insights that the study of the Federal Reserve's first 100 years offer to
economists, historians, and policymakers about how the Fed can best meet its objectives
today and in the future, a second reason to mark the centennial is the opportunity it affords to
educate young people about the Federal Reserve and its important role in promoting a
healthy economy and stable financial system. When I was an educator, I quickly came to
understand that students are most motivated to learn when they can see the connection of
the lesson to their own lives. The Fed and its activities, and economics in general, can seem
remote from daily concerns. But as teachers, you can show students how the Federal
Reserve's decisions concretely affect them and their families. The Fed's actions influence the
overall strength and stability of the economy, as you know, but they also affect the cost of a
mortgage, the prices of goods and services, and the health of the job market that your
students are part of or will soon be entering.
Economics also complements and enriches the study of history. When I took history classes
in high school, we spent much of our time memorizing dates and important events -
revolutions, wars, elections, the passage of laws, and so on. While I appreciated the need to
be familiar with such milestones, I remember feeling that I would like to know more about the
lives of ordinary people at those times, not just about kings and queens and presidents. In
college and graduate school, I studied economic history and found what I was looking for.
For me, economic history added critical context by zooming in on the conditions of ordinary
life - how people earned their livings, what their wages would buy, the extent to which they
felt economically secure, the pace of economic change that they faced. Appreciating what
the lives of ordinary people were like at various times and places helped explain the larger
events - the wars, revolutions, and elections - as well.
By the same token, understanding history also requires an appreciation of the role of key
economic institutions, including central banks like the Federal Reserve. When I was in
graduate school, my teacher, Stanley Fischer, introduced me to the work of Milton Friedman
and Anna Schwartz, which demonstrated that monetary policy can have enormous effects on
how the economy performs, for good or for ill. That realization helped motivate me to
specialize, in graduate school and after, in monetary economics and related fields. Similarly,
for your students, it's impossible to understand the Great Depression, America's strong
economic performance after World War II, or the recent financial crisis without learning about
the Federal Reserve and the debates that have surrounded it.
Learning about the Federal Reserve and about economics more generally will help students
in their daily lives, by helping them make better financial or career decisions, for example,
and by helping them become more informed citizens and voters. Learning about the Federal
Reserve and its economic context will also give students a deeper understanding of history,
as I noted. Yet there is one more reason why we at the Fed hope to use this centennial as an
educational opportunity - to maintain and strengthen the democratic accountability and
effectiveness of this institution.
Traditionally, like other central banks, the Fed was reluctant to explain its policy decisions or
otherwise engage with the public, partly based on a belief that this approach increased the
effectiveness of monetary policy. However, this lack of openness became increasingly out of
step with other institutions in our democratic society; it also reduced the effectiveness of Fed
policies by inhibiting public understanding and discussion of policy goals and strategies. This
approach began to change in the 1990s, when the Federal Reserve began to regularly
provide more information about how it saw the economic situation and how it would respond.
Increasing the Fed's transparency, openness, and accountability has been one of my top
priorities as Chairman. A more open Fed, in my view, is both a more effective and more
democratically legitimate institution. Indeed, the complex challenges we face as a nation are
best addressed in an environment of informed public discourse, which is only possible when
policy decisions are made in as transparent a way as possible. The centennial may be just
an accident of the calendar, but any time is a good time to help more people learn about the
Fed and what it does to enhance the economic well-being of Americans.
It is often said - alas, accurately - that teaching is a thankless profession, so let me close by
thanking you for what you give to your students. Our country and our economy need
informed citizens who can think independently and critically. More pertinent to today's
meeting, let me also thank you for your interest in teaching your students about the history
and role of the Federal Reserve. As many of you have discovered, the Federal Reserve has
a variety of classroom tools available through our education portal,
FederalReserveEducation.org . Notably, the System's economic and financial education staff
is introducing today a set of three lesson plans that examine the past 100 years of central
banking. I hope they will provide practical help in your classes.
Thank you for participating in today's event. I look forward to your questions and to an
interesting discussion of the Federal Reserve's past, present, and future.