Everyone is blaming Jerome Powell for something these days, like the stock market selloff that followed the Fed Chair’s testimony to Congress this week. But do these critiques suffer from a lack of depth? On Wednesday, Fortune published an article showing how mainstream academics view the Fed. Various quotes foreshadow what the general public is up against, starting with the headline:
‘It really shouldn’t be this way’: Top economist Mohamed El-Erian blames the Fed for bad messaging and stock volatility
According to Fortune, this “top economist,” was quoted saying:
Yet once again remarks by Federal Reserve Chair Jerome Powell fueled considerable volatility in markets that could risk both economic well-being and financial stability.
El-Erian continues:
Rather than overwhelmingly pricing in an increase of 25 basis points as previously signaled by the Fed, the markets moved the odds in favor of 50 points, which would reverse the downward shift in hikes the central bank prematurely made just a month ago.
More experts are cited. According to the head of Citadel, Ken Griffin:
The variance of the message over the last couple of weeks has been incredibly counterproductive.
The article’s author also gives a fool's hope to coming out of this crisis without a recession, thanks to remarks made by the Fed:
Historic data also points to how recessions have rarely been avoided after interest rates touched levels as high as they are currently. It’s possible that the Fed defies that, according to Philip Jefferson, a member of the Fed’s Board of Governors.
Per the Governor, “the current situation is different” because now we have:
… supply chain disruptions, a drop in the number of people working or seeking jobs, the Fed’s increased credibility to fight inflation, and its concerted efforts to reign in on high inflation rates.
One of the problems is that taking economic advice from a mainstream economist, a billionaire hedge fund manager, and a Fed board of governor is akin to writing a research paper about an experimental drug funded by a drug company; one should be wary of bias. These three individuals all have a strong vested interest in keeping the current central banking system running for as long as possible.
The comments made by El-Erian are highly superficial, and ignore the inherent problem, the Fed's very existence, and its ability to move markets with just one policy decision or even just a simple comment. At best, mainstream economists will talk about the Fed hiking rates too slowly, or too little too late, but they’ll never talk about the Fed being the culprit behind the depreciating currency, destruction of price signals, or how it benefits the rich over the poor.
As for Ken Griffin whose net worth fluctuates on a daily basis in and around $32 billion, it's safe to say his primary concern when it comes to central bankers is their ability to help his portfolio. His life has undoubtedly been enhanced due to the Fed’s easy money policies.
Meanwhile Governor Jefferson is likely compromised since he is literally on the Fed’s payroll, and the Fed doesn’t care much for intellectual diversity. His supply chain argument ignores disruptions due to the increase in the supply of money and credit. Plus, it’s now several years since lockdowns. Blaming the labor market also could use more depth, but they’ve hardly gone into this. Lastly, his notion that the Fed has more credibility now and is also more concerned with fighting inflation is a terrible slight since it diminishes the credibility of his predecessors.
Mainstream media falls under the same State apparatus who cares little for a voting age population who understands economics, central banking, currency debasement, nor how the Fed causes the problems it claims to solve. Ultimately, Powell testified to Congress, then a few wealthy and powerful people levied superficial shots. Nothing meaningful was shared to the public since no one at the top wants to do what needs to be done: Stop the Fed once and for all.
