Hughes discusses his recent book Marketcrafters, and how markets are deliberately built with outcomes that can serve the public good – or not. He uses this lens to unpack today’s economic flashpoints, from the Fed to crypto to climate.
Chris Hughes knows a thing or two about power and influence. He helped launch Facebook from a Harvard dorm room and watched it morph into one of the most influential – and, in his view, dangerously unchecked forces on the planet. Over the past decade, he has examined the underlying architecture of the American economy: how it operates, whose interests it serves, and how we might reimagine it to deliver broader prosperity.
In his recent book, Marketcrafters: The 100 Year Struggle to Shape the American Economy, Hughes explores a deceptively simple idea: markets don’t just appear out of thin air.
Whether we’re talking about cars, energy, housing, or healthcare, markets are designed. They’re built, shaped — and sometimes warped — by real people making real decisions. Behind the scenes, central bankers, regulators, elected officials, lobbyists, and technocrats are constantly crafting the rules, incentives, and frameworks that guide economic activity and steer the flow of money and power.
Hughes calls them “marketcrafters,” and their choices — often invisible to the public —are key to understanding how the economy works, and why it sometimes doesn’t. At their best, they can drive innovation, stability, and shared prosperity. But when they get it wrong, they can generate stagnation, inequality, and crisis.
This lens feels especially urgent right now. With mounting political pressure on the Federal Reserve, the explosive rise of crypto, and growing concerns about a second Trump administration bent on reshaping economic governance, the stakes of marketcraft have never been clearer. In a wide-ranging conversation with the Institute for New Economic Thinking (INET), Hughes unpacks what’s at risk, from efforts to stack the Fed with loyalists and the rise of stablecoins, to the need for coherent marketcraft on climate and natural resources.
His message is clear: markets may look like forces of nature. But they’re not. They’re made — and we’d better be paying attention to who’s making them, and for whom.
Lynn Parramore: With the Federal Reserve facing a crisis of intense political pressure and challenges to its independence, can you take a step back and talk about who the Fed is truly meant to serve and what its primary purpose is?
Chris Hughes: The Fed has been founded and re-founded at least three times, in 1913, 1935, and 1951, so it’s difficult to point to any one moment in its political history to answer that question. In reality, like other political institutions, it’s always reinventing itself and adapting for the moments we live in. Obviously, we know its legal mandate is price stability, maximum employment, and ensuring moderate long-term interest rates.
The Fed has also read its mandate to include financial stability and the prevention of systemic risk. And it has come to recognize that it sometimes plays a global role, not just a domestic one. That’s a lot of different missions for one institution to be pursuing at any one moment.
So your question of who’s it for — I think it is for all of us, all Americans. Those goals of maximum employment and price stability are things that every American can, does, and should benefit from. It’s also true that its methods of delivering that have particular attention to finance and banking.
There are ways to deliver on price stability and maximum employment that involve Congress, that involve fiscal solutions. The folks at INET have discussed everything from tax policy to job guarantees and other ideas that are out there. The Fed believes that through its management of monetary policy and the regulatory structure for banks and finance, that it can help deliver on those top-line goals.
The Fed is meant to serve all of us, but its methods to achieve those goals tend to disproportionately affect banking and finance. I think often it has been in a position where it’s supporting the institutions of banking and finance, particularly in crises. Sometimes it’s been appropriate, sometimes it’s gone too far.
In some moments, the Fed’s regulatory and supervisory roles hold financial institutions to certain standards — and that should happen in both good times and bad. It often does this well, though mistakes still occur.
So this is a very broad answer, because I think the Fed as an institution is extremely important macroeconomically, which means it’s important to everybody, but particularly to finance and banking folks.
LP: You’ve written about pioneers like Andrew Brimmer, the first Black Fed governor, and Nancy Teeters, the first female governor, who brought fresh perspectives to the Fed — often as dissenters. How do you see the current attack on Governor Lisa Cook fitting into the bigger picture of representation and decision-making at the Fed? And what do you think this challenge means for the Fed’s independence and its ability to serve the broader public?
CH: There’s a lot in that question. The attempt to remove a governor from the Board, as you know, is unprecedented. There have certainly been serious efforts over time to influence — or even bully — the institution, but this is next-level. I think it’s part and parcel of a broader strategy by the president, not just to influence the Fed, but to make it kneel before him. It’s part of a vision, Trump’s vision, of the entire federal government as something that should be under direct command and control from the office of the president, where he can make decisions that even Congress says he cannot.
Congress makes it clear that members of the Board of Governors can only be removed for cause, and this is a pretty thin pretext. Historically, removal has required something far more serious to meet that standard.
LP: The move seems thuggish, one might say.
CH: Yes, I think that’s the right term. As an institution, we’re all watching closely to see just how strong its insulation really is. Most central bankers, going back to the Fed’s beginnings, have believed that the ability to make decisions independent of the political cycle is a virtue.
At the same time, Congress designed the Fed to remain responsive to the political system. The president can nominate members of the Board of Governors, including the chair, but they have to be confirmed by the Senate. So there’s democratic accountability built in.
Still, they serve 14-year terms for a reason, and can only be removed for cause, for a reason. That’s because sometimes we need the central bank to do unpopular things, like raising the cost of credit — even if that makes mortgages more expensive — in order to maintain price stability.
And we want the Fed to step in at times to ensure the orderly liquidation of major banks — and sometimes even non-bank financial institutions. Because when something blows up in the middle of the financial system, it can trigger much bigger problems. Of course, the goal is to do the work ahead of time to prevent that risk in the first place.
But when intervention is needed, we want the Fed to help these firms unwind in an orderly way, not just collapse, like Lehman did. That kind of action is often unpopular, but it’s necessary. And I think one reason the Fed has been largely successful over time is because it’s insulated from the ups and downs of the political cycle.
I believe that insulation is really important to preserve. The question is: how resilient will it be? There are some extreme scenarios being discussed where Trump is able to get a majority on the Board of Governors, with that particular majority then moving to dismiss the Reserve Bank presidents. People are talking about it. I think it’s quite unlikely, but it’s evidence of a strategy on the part of this White House to dismantle what’s helped the Fed play such an important role for so many decades.
LP: You’ve written about marketcrafting as something that, at its best, serves the public good. If Trump is trying to stack the Fed with loyalists and demand loyalty from its governors, who is the Fed really representing at that point? Maybe one way into that question is crypto. Trump has shown interest in it, and some are wondering: could gaining control over the Fed be part of a broader effort to shape emerging markets like crypto in ways that benefit wealthy investors, rather than the broader public? Do you see a risk in that sort of marketcrafting?
CH: People are always asking me if Trump is a marketcrafter, and my consistent answer is that for the most part, he’s not. Because that requires a plan, and it requires consistency.
What we’re seeing is economic policy by whim, for the most part. You can see it in the tariff negotiations, in the Nvidia deals, in the 10% stake in Intel, etc. Now, the one place where I think we see an exception to that — so far in this administration —is crypto.
LP: You’ve warned that marketcrafting can potentially become a kleptocratic endeavor. Do you see that with crypto?
CH: In the book, I have a few key ingredients for marketcrafting to be occurring.
First, you have to have the intent to manage or organize a market in some way for the public interest. You can think of it as shaping the clay. You know where you want to go. You’re going to sculpt it into something.
I think that is what they’re doing in the crypto space. They want crypto to be more popular. They want it to be more accessible. They believe that it holds long-term promise as an asset category, if not a means of payment, and they want to support it. So there are a lot of different interventions that you’re seeing. The Treasury is talking about a crypto reserve fund. The SEC’s approach to regulating these assets has done a complete 180.
The so-called Genius Act, passed over the summer, created a framework for the use of stablecoins, and that’s a clear example. You can see them bringing the tools of the state to bear to support and amplify this market.
The problem is, at a foundational level, I just don’t believe this is in the public interest.
Crypto has no underlying value. I think it’s largely a scam, and I think you can see in the President’s own issuance of these coins — which have meaningfully enriched him and his wife — evidence of the kleptocracy that you mention.
He sees this as a way to continue to profit off of his name and his brand — and hey, it’s working for him from a dollars and cents perspective. So, unsurprisingly, all the people around him also see the opportunity to profit. They’re all headed in the same direction to support this industry. Unfortunately, I think a lot of everyday people will suffer the most when these markets tumble, as they inevitably will.
LP: Yes, and even though the Fed doesn’t directly regulate stablecoins, it still has influence — on regulation, on public perception, and potentially in moments of crisis. As stablecoins grow, do you think there’s a risk they could create new vulnerabilities in the financial system that might ultimately pull the Fed in?
CH: I think that the danger is that stablecoins grow significantly in volume and size and become a meaningful, what we call “near money” — a money-like asset, like commercial paper, money market mutual funds, or repurchase agreements (repos). It’s possible that stablecoins grow and become so significant that the Fed has to set up an emergency facility in the case of a run.
This is what we’ve seen in 2008, and again in 2020, and in other moments as well. When there’s a run on these short-term assets, these money-like assets, the Fed will step in to support them. Money market mutual funds are regulated by the SEC – not by the Fed. And yet, both in 2008, when the Reserve Primary Fund “broke the buck,” and then again in 2020, the Fed shows up with an emergency facility to ensure that the managers of those funds are able to stay afloat.
If you do that in emergencies, that is effectively a subsidy, unless in the good times, you’re ensuring that those issuers are either paying for that insurance or subject to regulation to reduce the risk of needing it again. It seems to me that if stablecoins —unlike a lot of the other crypto things — are likely to grow meaningfully over the next couple of years. And if they do, I think that poses a real risk, not just for financial stability concerns for the system itself, but for those of us who want to see fewer bailouts.
LP: Do you think stablecoins could be risky or harmful for ordinary consumers?
CH: My top concern with stablecoins is money laundering and the shadowy international networks. It has never before in history been possible to steal a billion dollars or even transfer a million dollars without any government or any intermediary knowing. You have to have a lot of suitcases of physical cash to do that. If you try to transfer a meaningful amount of money to me, both the banks and the government know about it.
We have a “know your customer” set of legal frameworks to ensure that you’re not giving it to me for terrorism or for something beyond the pale. With stablecoins, however, the issuer does need to know the identity of the person once they’re issued — but then, once they’re in the market, you can sell them or send them to anyone, and they can travel all on their own.
This is what the dream is. The fantasy is so-called decentralized finance, where there are no institutions and intermediaries. And the big downside to that is — there are no institutions or intermediaries! So if you are the Iranian Revolutionary Guard or a Russian billionaire trying to avoid sanctions, stablecoins are amazing. You get access to dollar stability for all of your assets, which you otherwise wouldn’t have. And nobody even knows.
So I think that is a major risk. For American consumers, I’m a little bit less concerned that there’ll be a wholesale movement out of commercial bank dollars, the dollars we all use, into stablecoins. Perhaps because of the instantaneous transaction clearing – maybe it could happen, but I don’t think that’s where the real growth is.
It’s much more in crypto and other illicit markets.
LP: What do you think about a public digital currency? Is that something that you think would be viable?
CH: I think that the key thing that we want is near-instantaneous resolution of transactions. A payment system that works.
There is a real problem in the United States in that a lot of people are paid on Friday, but because of how many ACH payments are processed, it can take a couple of days to show up in a bank account. If you need to make rent, that’s a big problem.
Internationally, it can also be a problem. If a supplier in New York needs to pay someone in Bangkok, it can go through multiple different banks. It can take three to five days for a transfer to fully complete.
So that needs to be improved. Payment systems can do that. The Fed has the Fedwire system, which moves large wires transfers in instantaneous fashion.
And there is a newer system called FedNow, which should be accessible to everyone for a low fee, person-to-person transactions, not dissimilar from what people experience on Zelle or elsewhere. We know how to do this, is what I’m trying to say. We’re not always doing it well, but we know how to do this, and this can be solved in a much easier way than I think many believe.
Creating a central bank digital currency that is reliant on a new technology, i.e. the blockchain, to move is unnecessary, and, I think, confusing and distracting to everyone. In that scenario, then your dollar and your Chase bank account would actually be different than a central bank dollar. The first is a liability of a commercial bank. the second is a liability of the central bank. In an emergency, the second is going to be a little bit safer.
How do you value these two? Is everyone able to hold these? Just institutions? Right now, it’s only people with master accounts at the Fed — which is largely commercial banks. So, to me, this feels like a solution in search of problem.
LP: In the middle of all this chaotic period, what’s giving you some hope? Where do you see real potential for marketcrafting to actually move the needle in a positive way?
CH: It’s not an easy time to answer that question, but listen, I think that there are a lot of opportunities for marketcrafting to be successful for some of the most urgent problems that we face. Take housing: a thoughtful marketcrafting agenda could make it far easier to build. That means working with states and localities to streamline permitting and zoning — something the “abundance” advocates rightly emphasize —but also investing in industrial policy for modular construction, and developing more stable, long-term financing options.
Right now, developers are at the mercy of the Fed’s interest rate cycle. If we created more predictable lending tools, it would help them plan ahead and build more affordably. That’s where I see meaningful potential.
There’s certainly an opportunity for climate policy to have a serious marketcrafting, but it would need, if not a bank, a kind of coordinating institution to ensure that public capital is being invested in the places in the market where private capital is too hesitant to go. That’s a key failure that wasn’t addressed by the Inflation Reduction Act (IRA), and I think is really required for that to work.
The good news is that there are real opportunities for marketcrafting around things that both Republicans and Democrats care about.
LP: You’ve talked about a national investment bank.
CH: Yes, and in critical minerals in particular. I think we need more reliable supply chains there, and I do think the best way to do that would be to have a national investment bank with a clear mandate.
My preferences are that it should focus on mitigating the effects of climate change, ensuring supply chain resiliency — which would include critical minerals — and making sure national security objectives have appropriate funding. That’s something that tends to be broadly popular on both the right and the left.
The history of the Reconstruction Finance Corporation — the national investment bank we had nearly a century ago — shows that this approach can work. We can be hopeful because we now have a clearer, more realistic understanding of how marketcrafting can succeed.
But in the current moment, with all our government institutions and even the rule of law under direct assault, it’s hard to imagine what this could look like or to make the case for it. Still, I believe we have to defend now while also planning to build for the future. It’s hard for me to do both, and I think it’s hard for a lot of other people. But what choice do we have? This is the work we have to do.
