Opinion from a Libertarian ViewPoint

Powell Is the New Arthur Burns, Not the New Paul Volcker

Posted by M. C. on July 1, 2022

In other words, Powell’s Fed is a Fed that does no more than is absolutely necessary to convince the public and policy makers that it is “doing something” about inflation. This is all short-term political posturing, and reflects that fact Powell—like Janet Yellen before him—is a politically minded technocrat who thinks in terms of using the central bank to protect the regime.

Last year, just as it was becoming increasingly clear that price inflation was mounting, Jerome Powell repeatedly denied there was any reason for concern. He called inflation “transitory.” A few months later, he admitted it was not transitory, but denied it was “entrenched.” Then, by late 2021, he admitted price inflation was getting out of control but still took no action of any consequence. Through it all, the Powell plan was repeated delay and opposition to any lessening of the Fed’s established policy of ramming down interest rates again and again. 

By spring 2022, however, it became impossible to pretend the previous six months of rising inflation rates never happened. In order to avoid looking utterly clueless, Powell was forced to endorse a 25 basis point increase to the target rate in March. But that amounted only to a 0.50 percent target rate. Then there was a 50 basis point increase in May, so the target rate rose to a meager 1 percent. After June’s meeting, the target rate sat at 1.75 percent— a small fraction of the target rates we saw even during the years of monetary inflation and housing bubbles under Alan Greenspan. 


The other side of this ultraeasy monetary policy is quantitative easing via the Fed’s asset purchases of mortgage-based securities and government debt. These purchases were made with newly created money. Although Powell talked a big game about scaling back quantitative easing and reducing asset purchases, actual action was virtually nonexistent, and the Fed continued to print money for more asset purchases into March 2022. Since Powell finally announced the end of QE, the Fed’s assets have decreased by a paltry 0.3 percent. 

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