The ignorance surrounding monetary policy in the financial journalism industry has once again hit all time highs (not unlike the NASDAQ), with Bloomberg penning a recent Businessweek article that has crowned Jerome Powell as the Fed's "most transformational chairman" since Paul Volcker.
Apparently completely unaware that Volcker's policy prescriptions involved actually needing a backbone to stand up to the public and government discomfort that accompanied undoing an inflationary crisis, Bloomberg has somehow blurred the lines between raising interest rates to 11% and printing trillions of dollars in new money in the course of just months.
Instead, the piece praises Powell as "quick to recognize the economic devastation the coronavirus pandemic could cause" and for responding early. “We crossed a lot of red lines that had not been crossed before,” the article quotes Powell as saying - as if pushing the economy closer to its eventual breaking point at record speeds is something to celebrate.
If you're not on the floor laughing yet, you soon will be. The article then praises Powell for defying the long-held virtue of the Fed's political objectivity:
He also shunted aside the Fed’s long-held concern about risking a loss of its political independence and aligned monetary policy with fiscal policy of tax cuts and spending increases overseen by Congress and the White House. Powell urged lawmakers to go big on relief for hard-hit households and businesses even as the central bank snapped up trillions of dollars in Treasury debt that such largesse would generate.
This... about 18 months after former NY Fed president Bill Dudley wrote an op-ed advising the Fed to crush the market to prevent Trump from getting re-elected. Oh, and yes - the op-ed was published in Bloomberg.
And who better to memorialize Bloomberg's testimonial dinner for Powell than Warren Buffett himself, the investor who arguably has benefited more from monetary policy moral hazard in this country than anybody (except maybe Elon Musk)? Bloomberg was quick to point out that Buffett had commented in May: “I’ve always had Paul Volcker up on a special place, a special pedestal in terms of Federal Reserve chairmen. Jay Powell, in my view, and the Fed board belong up there on that pedestal with him.”
That's not the only "expert" Bloomberg consulted. Ex-central banker Nathan Sheets said that Powell's decision to no longer preemptively raise interest rates to head off higher inflation as unemployment falls was “revolutionary”.
Bloomberg then congratulates Powell for the Fed's 20 month long "strategic review" that resulted in "a radical rewrite of its blueprint for carrying out monetary policy". Or, in other words, the Fed continuing to do exactly what it has been doing for the last several decades: widening the wealth gap and senselessly abusing the money stock as if it were some kind of rented mule tasked with carrying the entire nation's collective burden up Mount Everest, in less than 30 minutes, without water breaks.
Ironically, the piece then points out exactly how different Volcker and Powell are:
To extricate the nation from an inflationary wage-price spiral four decades ago, Volcker dramatically asserted the Fed’s political independence by jacking up interest rates to as high as 22%, causing the economy to crater and joblessness to surge. Powell wants to lift too-low inflation by pushing joblessness down as far as possible and spreading the benefits of a tight labor market to Black and Hispanic people, as well as others who are frequently left behind. It’s a plan uniquely suited to a time of heightened focus on racial injustice and income inequality, and it fits in with Powell’s efforts to rehabilitate the Fed’s reputation as protector of Wall Street, not Main Street.
So we guess if Bloomberg uses the word "transformational" - without regard to whether or not we are heading toward complete monetary armageddon - they could technically be right. Volcker's actions put the economy back on solid footing and led to decades of prosperity, savings and productivity. Powell's policies are "transformational", too - they are accelerating the U.S. economy into a downward spiral exponentially faster than any Fed Chair has in the past. Transformational, indeed.
Peter Hooper, a 26-year veteran of the Fed, seems to agree. He told Bloomberg that Powell has altered “the longer-term direction of policy in many ways, in as transformative a way as Volcker.”
But we digress. Maybe another cover story is in order for Powell, who recently graced the cover of Barron's.
They keep praising central bankers like they do something. They print money. That’s it. One trick pony. A guy w/ a 50 IQ can do it. Zero thought involved. Anyone w/ 3rd grade math can be a Fed chair. The praise shows how little we know about monetary policy in the US. It’s sick. https://t.co/cwHsLYNP8F— Quoth the Raven (@QTRResearch) November 2, 2020