On Friday, March 10, the failure of Silicon Valley Bank — the biggest U.S. bank collapse since the 2008 financial crisis — heightened concerns about economic stability at a time when uncertainty was already high and the specter of a recession was looming around the globe.
As the U.S. government takes extraordinary steps to try to stem the fallout, Age of Easy Money, a new FRONTLINE special, tells the story of how the U.S. economy arrived at this unsettled moment.
Premiering Tues., March 14 on PBS and on streaming platforms, the two-hour documentary examines how the policies of the U.S. central bank, the Federal Reserve, ushered in an age of easy money — and explores the Fed’s decision last year to start hiking interest rates at a historic pace in an effort to fight inflation.
“Now we have to bring the hammer,” Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis and a current member of the Federal Open Market Committee, told correspondent James Jacoby in October 2022, referring to the Fed’s raising of interest rates. “Because if we don’t bring the hammer, this thing can get out of control.”
At the time of the interview, the Federal Reserve was pulling back on an epic experiment to revive the economy that it began in the wake of the 2008 financial crisis and again put into high gear when COVID struck the U.S. in 2020. As the documentary explores, that experiment involved lowering interest rates to almost zero and creating and injecting new money into the financial system, in what has been called an “easy money” policy.
“The financial system globally has been built around extremely low, ultra low interest rates for ten years,” author and journalist Christopher Leonard told Jacoby in the above excerpt, after Fed Chair Jerome Powell announced an interest rate hike in September 2022 as part of a pullback from the Fed’s “easy money” policies. “I think people don’t appreciate the magnitude of what the Fed did over the last decade.”
The Fed’s job is to promote economic stability and keep inflation in check, primarily by raising and lowering short-term interest rates. Directed by James Jacoby and produced by Jacoby and Anya Bourg, Age of Easy Money charts the course of the Fed’s “easy money” experiment as the risks and excesses that had been building in the age of easy money are beginning to surface. The documentary examines what led to the Fed’s choice to hike interest rates starting in 2022 and probes what’s happened since — including fears of a recession, disruptions such as the Silicon Valley Bank collapse, and concerns that the Fed’s efforts to drive down inflation could put it on a direct collision course with the job market.
“The Fed doesn’t ever want to say this out loud but their goal is, quite literally, to make businesses not wanna hire people or to get businesses actually to lay people off,” financial journalist Dion Rabouin of The Wall Street Journal said in the above excerpt from the documentary, referring to the Fed’s actions to combat inflation. Rabouin added that in order for the unemployment rate to reach the Fed’s projections, millions of people would have to lose their jobs.
As the documentary explores, the prospect of potential layoffs stemming from interest rate hikes doesn’t sit well with members of the organized labor movement. While acknowledging that part of the Fed’s mandate is to fight inflation — and that inflation, too, is a threat to workers — Liz Shuler, who leads America’s largest labor organization, the AFL–CIO, told FRONTLINE she’d been urging the Fed to slow down its rate hikes.
“We can’t take aggressive moves that are gonna throw people out of work and basically balance the economy on the backs of working people,” Shuler said.
In an exchange that unfolds in the above excerpt, Jacoby asked Kashkari if the Fed might eventually need to “basically hurt the jobs market” in order to bring down inflation, should inflation stay high and employment stay strong.
Kashkari — who notes in the documentary that numerous factors involving inflation and a potential recession are out of the Fed’s control — told Jacoby in October 2022 that the Fed must continue raising interest rates until inflation is under control.
“We are gonna have to keep raising rates until we get inflation back down, that is absolutely true,” Kashkari said. “And one of the sources of optimism — and it’s you know, it’s mild optimism — is when there have been recessions that have been caused by the central bank raising interest rates, the good news is, once inflation is in check and they reverse the policies, the bounce-back can be very quick.”
“So, we’re not trying to engineer a recession,” Kashkari added. “But if one were to happen, I feel pretty confident that we could have a very fast recovery.”
For the full story, watch Age of Easy Money, premiering at pbs.org/frontline and in the PBS Video App Tuesday, March 14 at 7/6c, and on PBS stations (check local listings) and FRONTLINE’s YouTube channel at 9/8c. The documentary draws on two years of reporting and interviews with prominent financial players, leading economic thinkers, current and former top-level Fed insiders, officials from the Trump and Biden administrations and people impacted by the country’s economic policies. The director, producer and correspondent of Age of Easy Money is James Jacoby. The producer is Anya Bourg. The senior producer is Frank Koughan. The editor-in-chief and executive producer of FRONTLINE is Raney Aronson-Rath.