Jay “The Inflation We Caused Is Transitory” Powell finally did it.
On Friday, the Fed chair finally mustered the courage to say that he is going to do the job he has been hired to do: the Fed will not “pivot” to cut interest rates until inflation slows meaningfully and persistently—even if the stock, bond, and housing bear markets become much worse and the economy goes into recession.
When in March the Federal Reserve finally moved to belatedly embark on a series of rate hikes to slow the hottest inflation in the United States since the 1980s, it signaled impending trouble for many emerging market economies.
The ongoing energy crunch has revealed the hypocritical, if not duplicitous, nature of the Western imposition of climate and energy transition goals on other nations. Of course, we care about environmental protection, but the current arrangement amounts to eco-colonialism, is wildly detached from local realities, and severely hurts African economies and lives.
When I interviewed for a teaching job at private college in Alabama more than twenty years ago, the recently elected governor had won partly on a platform in which the state would install a lottery system that would give students a $3,000 grant for college. As the provost and I discussed the prospects of this new program, he smiled and said, “We hope this lottery passes. Then we can raise tuition by $3,000.”
(The Alabama legislature, despite being controlled at the time by members of the governor’s party, failed to pass and implement the lottery.)
One of the most anticipated events on the Central Banking calendar commenced this week: Jackson Hole, where “policymakers, academics and economists from around the world” gathered to discuss plans for the future. Powell gave his much-anticipated speech on Friday, quickly getting to the tough talk:
According to commentators, countering inflation requires monetary authorities to actively restrain the economy, with “experts” believing that higher interest rates need not cause an economic slump. Instead, they believe that the Fed cab orchestrate a “soft landing.” It is questionable, however. that a soft-landing scenario is possible.
