In one of the columns I read Monday as I was looking for material to use in my post, it was stated that after the fiasco of the disappointing rate cut last week, former Fed Chairs took to the op-eds to defend Powell with the theme of needing to preserve Fed independence. I apologize that I don’t have a link for it, I simply can’t remember which one it was.
I’m not sure that the rush to op-eds happened in such dramatic fashion as it was stated. I have no idea which Fed chairs they were written by or where the op-ed(s) were published. But I did start looking for one to make the center of deserved ridicule because, as we know, the Fed has an official 2% PCE inflation target that it has defended as consistent with its mandates, and if preserving independence is such an issue that trumps compliance with legislated mandates I am completely mystified about why it would box itself into an official policy where independence wouldn’t enter the equation. It’s one those things that they either achieve or they don’t, and if they don’t achieve it after having argued that doing so is how best to meet the institution’s mandates, then it’s perfectly rational to deduce that they’re not doing the job in a legal way.
I mean, I certainly haven’t read anything in the law that says the Fed has a right to cause a rise in cyclical unemployment in order to preserve independence by resisting political pressure to do the right thing by every single wage earner in this country. Monetary policy simply is not about the Fed itself or the people who work there and the Full Employment and Balanced Growth Act makes that abundantly clear, along with the point of who is at the top of the food chain when it comes to economic policy and strategy with each agency following that person’s lead.
But, alas, to my knowledge, there’s nothing to ridicule. I got distracted from my search for laugh-worthy op-eds by some of the nonsense opinion pieces listed in the economics section on Bloomberg that say things like the Fed can’t do more, or shouldn’t do more, or won’t do more in sympathetic or even apologetic tones.
Really? Poor Jerome Powell needs all the wagons circled after how much national wealth has been destroyed over the last week alone in a situation in which we haven’t seen TIPS flash anything close to on-target inflation for over a year, and not for a decade before that. Doesn’t that smart – to say absolutely nothing at all about the people a lot farther down the economic food chain – as the inflation indicator is headed in absolutely the wrong direction given the general behavior of inflation during reallocation that the trade issues are likely to cause. Perhaps the apologizers should smell the java and demand to know where the reallocation inflation is instead before we all end up in a pretzel-like position kissing our own hind ends.
The bottom line here is that I can’t really think of a worse advertisement for Fed independence than the forthcoming cruel and unnecessary outcome of monetary disinflation for the sake of political points.
PS: There was a woman on Bloomberg this morning talking about how the Fed was, with the rate cut, walking a tightrope while threading a needle; as if it were risking a great depression on one side and 1970’s style inflation on the other. At that absurd comparison I experienced an uncontrollable fit of laughter, and I laughed until I cried.