Powell Testimony Quotes
- Uncertainty: “It’s important for us to be careful in the way we conduct policy simply because things are so uncertain and we don’t want to add to that uncertainty.”
- Autopilot, Not Data: “I do think it’s going to be appropriate for us to proceed along the lines we had in mind before the Ukraine invasion happened.”
- Not In Control: “There’s already a lot of upward inflation pressure and additional pressure does probably raise the risk that inflation expectations will start to react in a way that is negative for controlling inflation.”
The above testimony quotes via the Wall Street Journal, the bold introductions are my comments.
What About Hope?
Here’s an interesting exchange about hope.
- Sen. Richard Shelby (R., Ala.) pushed Mr. Powell to say whether he would follow the example set by former Fed Chairman Paul Volcker in the 1980s to push down inflation at all costs. “I would hope history will record that the answer to your question is yes,” said Mr. Powell.
- Mr. Shelby responded curtly: “That would be a departure from what you’ve done.”
Fed Still On Autopilot
FED’S POWELL: IF WE HAD KNOWN INFLATION WOULDN’T IMPROVE, WE WOULD HAVE USED TOOLS SOONER. – they are still buying bonds with rates at zero. pic.twitter.com/447v9w0ewI
— Michael Lebowitz, CFA (@michaellebowitz) March 3, 2022
FED’S POWELL: RISING OIL PRICES WILL RESULT IN INCREASED INFLATION. and for that reason, we decided to only do 25 instead of 50 in March… They clearly have no appreciation for the harm that comes with inflation.
— Michael Lebowitz, CFA (@michaellebowitz) March 3, 2022
Let’s Skip Policy Reporting
Powell on why section on systematic policy was omitted from Fed’s report to Congress:
“I, you know I, honestly, didn’t know that was the case, or if someone talked to me about this before the thing was printed and sent up here, I don’t remember, that’s also a real possibility.” pic.twitter.com/tlsWSTQfDZ
— John P. Hussman, Ph.D. (@hussmanjp) March 2, 2022
“I don’t remember, that’s also a real possibility.“
Fed Uncertain About Uncertain Things
This is a perfect excuse to review the Fed Uncertainty Principle and all its corollaries.
Fed Uncertainty Principle
The fed, by its very existence, has completely distorted the market via self-reinforcing observer/participant feedback loops. Thus, it is fatally flawed logic to suggest the Fed is simply following the market, therefore the market is to blame for the Fed’s actions. There would not be a Fed in a free market, and by implication, there would not be observer/participant feedback loops either.
Corollary Number One
The Fed has no idea where interest rates should be. Only a free market does. The Fed will be disingenuous about what it knows (nothing of use) and doesn’t know (much more than it wants to admit), particularly in times of economic stress.
Corollary Number Two
The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.
Corollary Number Three
Don’t expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem.
Corollary Number Four
The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it’s easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.
Need to Be Nimble
On Wednesday, Jerome Powell affirmed a rate hike in March to Congress. Yet Powell Stressed the Need to be Nimble.
The Fed is so nimble that it’s on autopilot due to uncertainty!
What About Recession?
Powell did not mention the R word in prepared remarks to Congress. And it did not come up in Q&A follow-up questions that I have seen.
My stance is quite a bit different.
A Recession Looms, Blame the Fed and Biden, Not Russia
A recession fueled by collapsing demand, a liquidity crunch, and fading stimulus effects is coming up. Inflation sure doesn’t help.
For discussion, please see A Recession Looms, Blame the Fed and Biden, Not Russia.
This post originated at MishTalk.Com.
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Mish
Logan, who heads the New York Fed’s market operations, said that asset purchases to support market functioning will be rare in the future.
“I expect circumstances warranting sizable intervention to support market functioning to be extraordinarily rare,” she said.