Age appears to be catching up with me. Or possibly naiveté occasionally clouds my judgement. Though after the harrowing experiences of the Great Recession, I thought I had witnessed enough of nearly every possible form of wickedness possessed by mankind in various degrees. But even with as jaded and cynical as I have become over the years, I apparently am not jaded nor cynical enough to fully appreciate the meaning behind the “complacency” queue when I hear it.
I’m confused frankly about Fed’s normalization strategy,” he told Bloomberg Television’s Vonnie Quinn and Mike McKee in May. “My judgment is, ultimately the Fed’s biggest job is to mitigate the risks of an exponential shock. I see way too much complacency.
In this quote, Warsh was not describing the Fed and I missed the point entirely because even after the character building exercise of the Great Recession, my faith in inherent good intentions had not yet been completely shaken to its foundation. There is indeed such a thing as being too charitable by default.
My disagreement with Mr. Moss on the potential nature of a Warsh Fed did not require several paragraphs of analysis in order to demonstrate the contractionary risk because Warsh’s own words tell us everything we need to know about his intent. Obviously, someone who believes that the Fed should create an atmosphere of volatility with tight money so that lessons in debt and risk are quickly learned, as sort of a random, blanket value judgement, would represent a profound departure from the status quo.
If consideration of Warsh for the nomination is not already done enough to stick a fork in it, it should be. Risk in investment must be realized on merit, not because the Fed continuously and purposely conducts debt deflation.