Jerome Powell and Dangerous Words

Below are some of the words I lifted from the Wall Street Journal, quoting the head of the US Federal Reserve, Jerome Powell

May 14, 2020 8:43 am ET | WSJ PRO

Good day. The Dow Jones Industrial Average dropped more than 500 points yesterday after Jerome Powell said more stimulus from Washington could be needed to support the U.S. economic recovery. The Fed Chairman said the economic outlook is “highly uncertain and subject to significant downside risks." 

Note: The 14th was a while ago. But in his remarks since then Powell has been a consistent pessimist about the economy and has urged the government to spend more and more -- there doesn't seem to be enough stimulus no matter what the government or the Fed does.

I’ve been writing and criticizing the Fed lately, but this went beyond my usual need to spout off. This is about him, not the system. Even while some of his lieutenants are predicting a relatively quick return to growth, Powell is shoveling gloom and doom on us.

Why is this dereliction of duty? Because the Fed is supposed to be a bastion of honesty, and it should be about doing and saying what is necessary to heal a weakening economy.

Since when is spreading gloom and doom part of the Chairman's job? Since when is spreading gloom and doom part of his tools to improve the economy? I don’t really care if the stock market swooned after his thoughtless and baseless statement. What I care about are the millions of people who will act on the fact that the head of the world’s most respected and powerful institution told people they should act in ways to protect themselves from a horrible economy. It’s like the fireman arriving at the fire scene telling people to jump out of the windows on the 99th floor.

What do people do when they are made to be surer that the economy is going to hell? They hunker down. They don’t spend; they save. They don’t borrow and invest. They hold money or gold. They don’t seriously look for a job. That’s what Jerome Powell told all these folks. Hunker down. How can that be good for the economy? Were there no upside risks for him to talk about? Apparently all the risks worth his time are downward. 

Does he have a crystal ball that lets him be so sure? And what about his colleagues at the Fed that hold different opinions? What about all those other economists who are talking about the different shapes of the recovery? What about those people who see a V-shaped recovery? Did he talk about that? No – he said jump from the 99^th floor.

Let’s suppose a recession has already started and will probably last a while. Is that news? Does the head of the Fed need to remind us of that? Why can’t the head of the Fed educate us about the facts that recessions – even severe ones – come and go? Why couldn’t he balance the gloom and doom with some positive realism? Or maybe it is political? Maybe he’d like to be working with a different President next year?  

He also advised more stimulus from Washington. He already said he would do whatever is necessary to flood the economy with money. That’s terrible enough but then two minutes after the government has already legislated how many trillions of new spending and tax cuts, he is advising that the government should do a lot more. A lot more? We have not had more than a moment to know the effects of the new trillions in spending – and he wants trillions more? Where do we get these guys from?

Apparently, he drinks the Kool-Aid that says that that there is no limit to how much money, deficits, and debts our country can absorb. I wish we could go back to Paul Volcker.