The Fed concludes their 2 day meeting today. Does Fed Chairman Jerome Powell show some guts like a Paul Volcker or does he cave and kiss Wall Streets rear end?
Does Powell Have Guts or Will He Cave into Wall Street?
- Thread starter West Dundee Hawkeye
- Start date
Isn't Powell a Texan?
If he is, he will probably do what Texans always do....do what is best for them personally. If he is an "investment banker" he'll take the money and run!
(I mention him being a Texan only because Bush appointed him as Under Secretary of the Treasury...but I am sure there is a Texas connection in there somewhere. And you all know how I love (and trust) Texans!)
If he is, he will probably do what Texans always do....do what is best for them personally. If he is an "investment banker" he'll take the money and run!
(I mention him being a Texan only because Bush appointed him as Under Secretary of the Treasury...but I am sure there is a Texas connection in there somewhere. And you all know how I love (and trust) Texans!)
What exactly would be showing guts and what would be kissing wall streets butt in your opinion?
I suspect he will cave ... but probably to the Liberal Politicians. They have quite a house of cards erected and have an interest in maintaining its existence.
Wall Street is way out in front of him, as usual.
Wall Street is way out in front of him, as usual.
Wall Street did not like Paul Volcker because he brought down double digit inflation. To do that he caused a severe recession by raising rates. In August, 1982, the Dow was at about 740, the PE was 6 and the dividend yield was 8%.
The opposite of Paul Volcker is Ben Bernanke. He started Quantitative Easing to create the "wealth effect" (read: trickle down economics). The Fed ended up injecting about $9 trillion that came from thin air, into the market.
The primary mandate of the Fed is price stability. The question becomes should the well being of Wall Street or Main Street be the objective?
proactive how? (also unclear whether you mean you/hroters or powell should have been proactive)
I would argue that the Fed should NOT have done any QE or ended it after QE 1 in 2009. "Creating the wealth effect" (read: helping Wall Street) is not a mandate of the Fed.
The wealth distortion is incredible. 90% of the country is clueless on this. Liberals slam Reagan for trickle down economics and that was peanuts compared to this.
I would argue that the Fed should NOT have done any QE or ended it after QE 1 in 2009. "Creating the wealth effect" (read: helping Wall Street) is not a mandate of the Fed.
The wealth distortion is incredible. 90% of the country is clueless on this. Liberals slam Reagan for trickle down economics and that was peanuts compared to this.
"We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.
Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior)." Ben Bernanke, 2002
Should we revisit your misunderstanding of the Fed's mandate and the pillars upon which this mandate stands?
I have no misunderstanding of the Fed's mandates. The original mandate was:
1. Price stability
The second and only other mandate is:
2. Full employment
You keep shifting the goalposts. The Fed has a dual mandate, neither carries more weight. A momentary deviation from one in a historical timeframe does not indicate that the Fed has deviated from its dual mandate.
I'm sure that you have an FRB branch somewhere near wherever you live, you should apply
The problem is providing $ trillions in liquidity to stimulate consumption, hurts exports, which hurts manufacturing, which then hurts the working class.
Not only is the investor class helped by QE but the working class is screwed.
Savings-Investment=Exports-Imports
The former Fed Gov of Kansas City wrote a book about this called "The Lords of Easy Money".
KC Fed Gov Book
In 2010, Hoenig was president of the Federal Reserve regional bank in Kansas City. As part of his job, Hoenig had a seat on the Fed’s most powerful policy committee, and that’s where he lodged one of the longest-running string of “no” votes in the bank’s history.
Hoenig’s dissents are striking because the Fed’s top policy committee — called the Federal Open Market Committee, or FOMC — doesn’t just prize consensus; it nearly demands it. The committee likes to present a unified front to the public because it is arguably the most powerful governing body in American economic affairs. Hoenig’s string of dissents shattered that appearance of unanimity at a critically important time, when the Fed was expanding its interventions in the American economy to an unprecedented degree. It was a hinge point in American history, and the economy has never been the same since.
Between 2008 and 2014, the Federal Reserve printed more than $3.5 trillion in new bills. To put that in perspective, it’s roughly triple the amount of money that the Fed created in its first 95 years of existence. Three centuries’ worth of growth in the money supply was crammed into a few short years. The money poured through the veins of the financial system and stoked demand for assets like stocks, corporate debt and commercial real estate bonds, driving up prices across markets. Hoenig was the one Fed leader who voted consistently against this course of action, starting in 2010. In doing so, he pitted himself against the Fed’s powerful chair at the time, Ben Bernanke, who was widely regarded as a hero for the ambitious rescue plans he designed and oversaw.
Hoenig lost his fight. Throughout 2010, the FOMC votes were routinely 11 against one, with Hoenig being the one. He retired from the Fed in late 2011, and after that, a reputation hardened around Hoenig as the man who got it wrong. He is remembered as something like a cranky Old Testament prophet who warned incessantly, and incorrectly, about one thing: the threat of coming inflation.
Being the lone voice of dissent in a room full of FRB Presidents that are advised by the world's top economists isn't a position you want to be in, but it seems to have served him well with a research position funded by the Koch brothers.
Do you believe the $9 trillion of QE was good even though it created massive distortions in the economy/market and rewarded the Top 1% beyond their wildest dreams?
Well the number is about half of that since the pandemic, and the distortions and half truths that you provide are disingenuous at best. Inflation was reasonable leading into the pandemic and was allowed to grow during it to avoid an abrupt catastrophic collapse imo
I don't know where you are getting your numbers. The Fed has done about $9 trillion of QE since 2008.
I am not making that up. What is your understanding of the amount of QE?
And yet there was minimal inflation until we had a global pandemic and a European war.
Much of that was done to prevent the economy from going into a catastrophic depression. There are big issues with the wealth gap but sacrificing the entire economy to bring everyone to zero is a terrible idea.
You say I am being disingenuous. Tell me what facts I have wrong. You mention the top economist all support Wall Street. Surprise, surprise. There is big $ money on Wall Street. The working class feels marginalized. Why do you think they voted for Trump?
A book was written about my wife's hometown of Oelwein, Iowa, called "Methland" since there is so much poverty and lack of jobs. Since I have known her, the town has shrunk by 40% while the rich get wealthy beyond imagine.
Either you are against subsidizing the investor class or you are not. I am not. I am for helping the working class.
1. The Fed did about $9Trillion of QE
2. The top 10% own 89% of the stock
3. The S&P rose from 666 to about 4300
Which of these facts are wrong?
Top 10%
Is the mandate of the Fed to support the investor class?
QE lasted from 2008-2022. I would not have done but I can see QE 1, which lasted for about 6 months. By the Spring of 2009, the economy was stabilized. Why keep doing it for over another decade? The average return on stocks is about 10%. Over the last decade it went up about 15% a year. The distortions from QE are incredible.
I didn't say those things about you.
You are completely wetting that the economy was stabilized in 2009. The QE and saving the economy did far more for poor people than it did for the rich - if we have a depression most of the rich stay rich while the poor and middle class grow poverty. At that point it's a trade off. Once started, and being so successful, it's hard to get consensus to stop it - particularly from the wealthy/powerful.
I know I am in the minority but I actually have faith in capitalism. From time to time sectors of the economy/market will get over priced. Recessions correct imbalances. That is beauty of capitalism. It reallocates money on the fly to where $ gets the highest return. Many fear recessions. I don't. I welcome them.
What the 2008 downturn was all about, was the lack of income growth for the middle class as a result of China joining the WTO in 2001. Tens of thousands of factories were closed and millions lost their jobs. This was hidden by loose lending practices. I highly recommend the movie "The Big Short" if you have not seen it. People were replacing income with debt to maintain their lifestyle through home equity loans. Also lenders were no longer asking for 20% down for a house. You could actually get a mortgage with $zero down. This loose lending pumped up home buying, which pumped up home prices, which helped taking out more $ for home equity loans.
Thanks for your reply.
The housing bubble due to lack of regulation was the cause. Banks and investment firms making billions on sub-prime loans that vanished when the bubble quite inevitably burst. The financial sector collapse threatened the whole economy and had to be supported by the government. The auto industry was devastated by the subsequent recession and had to be rescued to avoid hundreds of thousands of job losses and furthering the refrain closer to depression. The government spent to prevent a total collapse and it worked. Everyone is much better off for those measures - and the rich most especially.
Getting some time to read through today's commentary from Powell and some of the FRB Presidents highlights the quandry they're in right now. It's six in one and a half dozen in another if you curb inflation while we still have these supply chain backlogs and housing shortages. The solutions need to come from Congress, who got the country into this mess imo
