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

the economy and monetary policy are positive reflections of the fact that the economy is gradually drawing closer to our policy goals. how the committee should adjust the size and composition of the balance sheet to accomplish its goals and what level the balance sheet should be in normal times are important subjects that i look forward to discussing with my colleagues. 1 see, for example, board of governors of the federal reserve system ( 2017 ), “ federal reserve issues fomc statement, ” press release, february 1. this approach is consistent with the committee ’ s policy normalization principles and plans, available on the board ’ s website at www. federalreserve. gov / newsevents / press / monetary / 20140917c. htm. 2 this is the rationale in lael brainard ( 2015 ), “ normalizing monetary policy when the neutral interest rate is low, ” speech delivered at the stanford institute for economic policy research, stanford, calif., december 1. 3 the bank of england has stated that it is unlikely that it will reduce the size of its balance sheet until the bank rate has reached a level of around 2 percent ; see bank of england ( 2015 ), inflation report ( pdf ) ( london : boe, november ), p. 34. 4 in 2006, the bank of japan reduced the size of its balance sheet by allowing short - term security holdings to run off and without relying on asset sales ; see kazuo ueda ( 2010 ), “ the bank of japan ’ s experience with nontraditional monetary policy ( pdf ), ” paper presented at “ revisiting monetary policy in a low inflation environment, ” a conference held at the federal reserve bank of boston, october 16. 5 the committee has indicated that it intends to reduce the federal reserve ’ s securities holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principal on securities held in the system open market account ; see federal open market committee, policy normalization principles and plans, in note 2. 6 there may be differences in the specific ways changes in short - term rates and the balance sheet transmit to different asset prices and the exchange rate, although estimates are limited and lack precision. 7 see, for example, michael woodford ( 2012 ), “ methods of policy accommodation at the interest - rate lower bound ( pdf ), ” paper presented at “ the changing policy landscape, ” a symposium sponsored by the federal reserve bank of kansas city,