Make no mistake: I oppose President Trump’s attempts to oust Jerome Powell as Federal Reserve Chairman as well as his insistence on lower interest rates.
That said I don’t think we should lose sight of something. Mr. Powell has been a terrible chairman. Compare his record with that of his two predecessors. Under his tenure inflation was at its highest level in 40 years and longer still if we calculated CPI as it was prior to 1990. And that could have been prevented had the FOMC responded in 2020–2021 to clear monetary expansion signals instead of clinging to a politically fashionable view of “transitory” inflation.F5h34p4ofie3w
Furthermore, he gives “technocracy” a bad name. He is a lawyer by training not an economist or a banker. He worked for an investment bank which is quite a different creature despite the name. That provides him with an entirely different conceptual underpinning and habits of thought. That shows in the way he defers to consensus narratives rather than leading with analysis. He should never have been appointed as Federal Reserve Chairman. That was one of President Trump’s mistakes in his first term.
He behaves more like an ordinary politician than a technocrat, calibrating decisions to institutional optics and elite approval rather than to empirical rigor.
The Fed needs structural reform not to politicize it but to make it more empirical and less narrative-driven. It is now a late 19th century structure in a 21st century economy, radically different from the one for which it was devised.
What should happen at this point is that the White House should leave Mr. Powell where he is and let him serve out the balance of his term.
Dave Schuler: And that could have been prevented had the FOMC responded in 2020–2021 to clear monetary expansion signals instead of clinging to a politically fashionable view of “transitory” inflation.
It was largely transitory, related to the pandemic recovery with pent-up demand and broken supply chains. The recovery from inflation was faster in the U.S. compared to peer countries, even as the U.S. economy continued to grow.