"In late February 2020, I attended an overseas meeting of the G-20 nations’ finance ministers and central bank governors. At the time, the U.S. was enjoying its longest economic expansion on record, and though my Fed colleagues and I had been monitoring Covid-19, we did not yet see it as likely to have a major impact at home. But that weekend, it became clear that the virus was spreading quickly—and widely. I left with the conviction that its effect would not be confined to faraway lands, as I had thought, but would reach every part of the globe."
That's how Powell begins his just published WSJ op-ed in which he recounts the events from the covid crisis, and specifically the days before the Fed announced the nationalization of the bond market by purchasing IG and HY corporate bonds and ETFs, a move which effectively tipped the US into USSR territory.
But that was the least of Powell's concerns, who looks back and says that "we had to act forcefully" to "help people get through what was going to be a terribly difficult time" as "the danger to the U.S. economy was grave. The challenge was to limit the severity and duration of the fallout to avoid longer-run damage."
Powell then emphasizes that the biggest hit from the pandemic was on low-income workers (which doesn't explain why he then proceeded to make billionaires the richest they have ever been).
The pandemic inflicted a cruel and uneven toll on lives and livelihoods. It reversed the broadening gains of a decade of expansion. With unemployment at a 50-year low, wages had been moving up, especially for the lowest paid workers. Racial disparities in unemployment were narrowing, and many who had struggled for years were finding jobs. But the new job losses were heaviest among relatively low-paid workers, among whom minorities and women are overrepresented. Many smaller businesses faced the possibility of permanent closure.
So after that bleak flashback, Powell then fast forwards to today, saying that "the situation is much improved. A little more than half of the initial job losses have been regained. With the arrival of vaccines, the outlook is brightening. The American people have persevered through this difficult time with determination, resilience and ingenuity. We owe a debt of gratitude to our fellow citizens on the front lines of the response, from health care workers to vaccine researchers, from those who kept grocery stores open to those who taught children at kitchen tables."
And then, in a preview of what will be Powell's three media appearances next week, the Fed chair repeats his message from the FOMC presser and his applying his own take on Draghi's "whatever it takes", namely that "the recovery is far from complete, so at the Fed we will continue to provide the economy with the support that it needs for as long as it takes. I truly believe that we will emerge from this crisis stronger and better, as we have done so often before."
The jury is clearly out on Powell's optimism, which will require not only a market and economy-crushing taper but painful rate hikes before it can be consummated...