It Is Easy To Imagine A New Fed Chairman Post Election
Powell has made enough mistakes to justify his removal, as if his terrible COVID response (2 years of QE at $120 billion per month) wasn’t enough justification to remove him from his seat as Fed Chairman.
Powell was very late to recognize inflation. This despite the fact that the Fed’s heavy money printing from Q1 2020 - April 2022 was the reason the U.S. suffered (and continues to suffer) price inflation.
Powell treated inflation with kid gloves. Say what you will about the Fed’s raising rates, in my book the Fed never got Fed Funds above the rate of real world price increases. Therefore, the yield curve has been in negative real yield territory all throughout the Fed’s tightening period.
QT was weak compared to QE. Further, the Fed’s QT effort paled in comparison to its QE effort. I would like to see the Fed get its balance sheet back down to $5 trillion.
Last, the Fed was too quick to cut rates. The Fed jumped the gun on rate cuts given that Powell had gone dovish on December 13th 2023 and given that QT was muted.
This Thursday will show another elevated Core CPI print above 3%.
The Fed ought to stop setting interest rates - allow the market to do so - and should instead focus its efforts on flexing the money supply when appropriate - which would be once we are in a recession (grow the money supply), or once inflation starts to run hot (shrink the money supply).
Powell ought to have kept silent in this election year until after November. Very unprofessional and highly political on his part to have cut rates in September.
A Monetarist Fed Chairman is what the Fed needs given that inflation is a function of the money supply.