Senior Communications Specialist, Public Affairs Department, Federal Reserve Bank of St. Louis
By Suzanne Carter Jenkins
“There are few, if any, useful ideas in economics that cannot be expressed in clear English. Obscurity rarely, if ever, denotes complexity of subject matter; it never denotes superior scholarship. It usually signifies either inability to write understandable prose or – and more commonly – muddled or incomplete thought.” – Renowned economist John Kenneth Galbraith, “The New Industrial State.”
Given the prevalence of economic and financial market news and jargon in today’s increasingly vocal public discourse, it is now more important than ever before that economic and financial concepts be expressed clearly.
In his Sound Money Guide to Economic Literacy, Minnesota Public Radio’s Chris Farrell noted, “Learning more about economics beforehand may not stop us from doing something financially foolish or voting for a well-intentioned program that will backfire. But a better stock of economic knowledge should improve our capacity for thinking through our choices and our ability to exercise critical judgment when it comes to policy.”
Consider these examples of economic terminology that have been frequently mentioned in today traditional and social media:
- The Twist
- Quantitative Easing
- Zero Bound
“The Twist” is an exuberant song and dance made famous by singer Chubby Checker in the 1960s.
It also happens to be the nickname that that caught on in late 2011 to describe a policy (Operation Twist), which the Federal Reserve decided to use again as part of its efforts to bolster the U.S. economy. It involves the “twisting,” or shuffling, of the Fed’s Treasury bond holdings; in this case, selling short-term Treasury bonds in exchange for the same amount of longer-term Treasury and mortgage-backed bonds. “Operation Twist” was also used in the 1960s, with the goal of keeping interest rates low, which boosts the economy by essentially encouraging consumers and companies to borrow and spend money on goods and services.
While “Quantitative Easing” and “Zero Bound” may be catchy enough to someday inspire songwriters or Hollywood script writers, for now they remain just a few of the economic terms that have become commonplace in the media.
A bit of background: In the past, the Fed’s primary monetary policy tool was to adjust the federal funds rate (the overnight rate at which banks lend to each other). This was back in the day when these rates were not hovering near zero percent, or what is commonly referred to as the “zero bound.”
Quantitative easing (also known as QE) and its successor, QE2, were some of the new monetary policy tools the Fed implemented to bolster the economy as the fed funds rate remained at the zero bound.
The first round of quantitative easing, launched in late 2008, was in response to one of the most acute phases of the crisis: The financial markets seized up and regulators were afraid the financial system would fail. Then in late 2010, QE2 was implemented to try to further jumpstart the fragile economy by lowering interest rates through the purchase of long-term Treasury bonds.
Also making news headlines during and after the crisis were a plethora of confusing, but important-to-understand acronyms such as:
TARP (Troubled Asset Relief Program)
TAF (Term Auction Facility)
TALF (Term Asset-Backed Securities Loan Facility)
SIFI (Systemically Important Financial Institutions)
TBTF (Too Big to Fail – Refers to very large and systemically interconnected financial institutions whose failure could be disastrous for the economy and might result in government intervention.)
GSEs (Government-Sponsored Entities, including Fannie Mae and Freddie Mac.)
(Note: Each term above is linked to Federal Reserve definitions or speeches made by Fed officials, available to all on the Federal Reserve Board of Governors’ site at www.federalreserve.gov.)
At one time, such nicknames, acronyms, terms and concepts would have been the bailiwick of economists, bankers and accountants, as well as monetary and fiscal policy makers and the specialized media who covered them.
Now, economic and banking news and developments are being covered by a broad spectrum of media on a daily basis, including traditional venues like newspapers, television and radio, as well as new platforms such as blogs and social media outlets like Twitter.
The media, like the public, also needs to have access to good sources of accurate economic and financial market information.
To help meet this need, the St. Louis Fed invited the general public and the media to attend a free series of evening discussions called “Dialogue with the Fed: Beyond Today’s Financial Headlines.” Video and slide presentations of each of the dialogues are available for viewing on the St. Louis Fed’s web site, and the final two events were webcast live to an even larger audience. Each dialogue featured a discussion with a Fed official, followed by a question-and-answer session.
A year prior, the St. Louis Fed also hosted a lunchtime series on “A Discussion on Financial Regulatory Reform in response to a growing need for more information from bankers and the public. These sessions, again held in St. Louis and its branch offices, featured both Fed officials and guest speakers on the most critical issues regarding regulatory reform efforts. Video and presentations were also made available after each discussion for the public to be able to view.
In addition to hosting in-person events, the Federal Reserve and each of its 12 regional banks, including the Federal Reserve Bank of St. Louis, provide a wealth of free economic and personal finance educational materials, courses, videos and podcasts via its web site and catalogue. The St. Louis Fed’s educational materials, for consumers as well as for students in grade school through college, can be found at http://stlouisfed.org/education_resources/ . The St. Louis Fed is also home to FRED™ (Federal Reserve Economic Data), a free data and charting resource that anyone can use.
During the financial crisis, the St. Louis Fed developed a “Financial Crisis Timeline” complete with a glossary and an FAQ to help visitors keep track of events and policy actions as they happened. When lawmakers started work on financial regulatory reform, we created a regulatory reform timeline for the public, and once the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was passed, we developed a comprehensive reg reform rules site to guide visitors and bankers through the rulemaking process and provide easy access for submitting comments and keeping track of legislation.
At the national level, the Federal Reserve System is also continuing its goal to enhance the transparency of its communications.
In April 2011, Federal Reserve Chairman Ben Bernanke started giving regular press briefing after the end of two-day Federal Open Market Committee (FOMC) meetings “to further enhance the clarity and timeliness of the Federal Reserve’s monetary policy communication.” These briefings held a few hours after the conclusion of these meetings are webcast live for all media and the general public to view. The webcast links can be found on the Federal Reserve Board of Governor’s web site.
Not that long ago, the FOMC didn’t mention its decisions at all to the media and general public. It wasn’t until 1994 that the Fed started immediately reporting its decisions on changes to the federal funds rate. It wasn’t until 2000 that the FOMC started issuing accompanying statements with its decisions that indicated whether it viewed impending economic risks as inflationary, balanced or tending toward a weakening economy.
Now, the text of all FOMC decisions can be found on the Federal Reserve Board of Governor’s web site following the end of each meeting. Minutes of the FOMC meetings, another recent development, are now posted about three weeks after each meeting, providing further insight into policy decisions.
It seems that the Federal Reserve System and its regional banks like the St. Louis Fed have taken Galbraith’s idea to heart and begun to communicate more clearly and transparently and to provide materials to help educate current and future citizens.
Suzanne Carter Jenkins currently serves as a senior communications specialist in the Public Affairs department of the Federal Reserve Bank of St. Louis. Prior to the Fed, she worked as a consultant and for the CME Group in Chicago as its managers for internet marketing and marketing communications. Before joining the CME, she was a reporter for Bloomberg News and the former Knight Ridder Financial News, specializing in the futures and options markets. She also covered the business beat for several newspapers around the country. Jenkins graduated from the University of Iowa with honors in Journalism and Mass Communications with an emphasis in economics. She switched her honors emphasis from politics to economics after taking an introductory economics class and discovering the world of macroeconomics and its fascinating real world applications.
