Yesterday we saw the performance of a man at the end of his rope. Chairman of the Federal Reserve Jerome Powell delivered a brief message that barely touched the bases. He introduced himself, promised to keep the Fed on its course of fighting inflation, and sat down.
The speech was scheduled for half an hour, and everyone familiar with politicians knew it would probably take 45 minutes or more. A speaker like Bill Clinton could spend more than an hour just telling us how he feels “our pain.” This speech was one of those significant occasions when the Washington types managed a real stem-winder. A time when they reach back into their rhetorical bag of tricks and come out with flourish after flourish.
Powell’s speech lasted less than 10 minutes. About the amount of time a new acquaintance uses to introduce themselves. However, it was clear that much of Friday’s speech ended up in the editor’s waste basket. Something happened the day before that caused Powell to edit away most of what he planned to say.
It was clear that Powell’s heart was not in this.
Friday’s speech was to show the world how Jerome Powell and the Federal Reserve would fight these higher prices that plague our economy. You see, Powell’s task is to curb inflation. It’s the role that this Administration has given him and the mandate that Wall Street and the American public expect him to fulfill.
But just the day before Powell is to give this meaningful address, the nation’s “Inflator” in Chief, Joseph Robinette Biden, declares one of the most significant acts of pure inflation ever.
While Powell sat in his office putting the final edits on Friday’s address. Biden was in the limelight, declaring that he would wipe away billions and make that trillion of student loans. The University of Pennsylvania estimates this single act will cost a trillion dollars. A trillion dollars of pure, unadulterated, 100% inflation. That’s a trillion dollars that the nation doesn’t have.
This President richly deserves his title of “Inflator” in Chief. He spends like no one else in history, stimulus checks for all, incentives for the Green Transition, unlimited funds for Ukraine, and now the trillion dollar Student Loan debacle.
It’s all inflation, all the time.
Economists maintain that to have an effective overall economic policy, the entire government must operate from the same page. Fiscal policy, that’s, government spending, must be in harmony with monetary policy, that’s central bank operations. When operating together, the economy will perform well. But when they are in conflict, like they are now, the policy will fall apart.
Jerome Powell knows this well. And he knows that the President’s actions entirely negate virtually everything the Fed does. And making matters worse, the President is taking these actions without consultation with anyone else.
I guess the Student Loan debacle came as a complete surprise to Powell. It was no doubt impetuous. It reflects the actions of a man with diminished capacity and a desire to be popular. I doubt that Biden gave anyone a “head up” or asked for input.
Instead, Biden ends up with an economic policy in complete disarray and a Fed in near revolt.
All this came crashing down on Powell yesterday. As he took the podium, he knew he would need to tell everyone they were in for some pain. The Fed would continue to raise interest rates, which would be tough medicine, but if we all worked together, it would reduce our number one economic enemy: inflation. In other words, the nation would need to go on a financial diet.
On the other hand, Grandpa Joe was handing out ice cream cones. Hoping that the young people would like him after he showered them with gifts. Not telling them, of course, that he was inflating away their future, that they were the ones most injured by this profligacy. There was no note that their future would be stunted by the overwhelming mountain of debt that Biden created by this reckless act.
What we saw in Powell yesterday was an angry man. He knows he’s the “fall guy.” Powell and the Fed will be blamed when inflation continues when it turns out that the Fed’s restrictive monetary policy cannot offset Biden’s inflationary fiscal spending.
Ultimately, we will see that a 75 basis point rise in interest rates cannot constrain a trillion dollars in spending. It’s a lesson that the President has not learned in 50 years in Washington.
But then, I don’t think Biden cares.
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