Fed Chair Jerome Powell Hides Behind a Cloud of Uncertainty – Mish Talk

March 5, 2022

Powell quote from Congressional testimony, image from Fed image repository

Powell Testimony Quotes

Uncertainty: “It’s important for us to be careful in the way we conduct policy simply because things are so uncertain and we don’t want to add to that uncertainty.”
Autopilot, Not Data: “I do think it’s going to be appropriate for us to proceed along the lines we had in mind before the Ukraine invasion happened.”
Not In Control: “There’s already a lot of upward inflation pressure and additional pressure does probably raise the risk that inflation expectations will start to react in a way that is negative for controlling inflation.”

The above testimony quotes via the Wall Street Journal, the bold introductions are my comments.

What About Hope?

Here’s an interesting exchange about hope.

Sen. Richard Shelby (R., Ala.) pushed Mr. Powell to say whether he would follow the example set by former Fed Chairman Paul Volcker in the 1980s to push down inflation at all costs. “I would hope history will record that the answer to your question is yes,” said Mr. Powell.
Mr. Shelby responded curtly: “That would be a departure from what you’ve done.”

Fed Still On Autopilot

Let’s Skip Policy Reporting

“I don’t remember, that’s also a real possibility.“

Fed Uncertain About Uncertain Things

This is a perfect excuse to review the Fed Uncertainty Principle and all its corollaries.

Fed Uncertainty Principle

The fed, by its very existence, has completely distorted the market via self-reinforcing observer/participant feedback loops. Thus, it is fatally flawed logic to suggest the Fed is simply following the market, therefore the market is to blame for the Fed’s actions. There would not be a Fed in a free market, and by implication, there would not be observer/participant feedback loops either.

Corollary Number One

The Fed has no idea where interest rates should be. Only a free market does. The Fed will be disingenuous about what it knows (nothing of use) and doesn’t know (much more than it wants to admit), particularly in times of economic stress.

Corollary Number Two

The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.

Corollary Number Three

Don’t expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem.

Corollary Number Four

The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it’s easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.

Need to Be Nimble

On Wednesday, Jerome Powell affirmed a rate hike in March to Congress. Yet Powell Stressed the Need to be Nimble.

The Fed is so nimble that it’s on autopilot due to uncertainty!

What About Recession?

Powell did not mention the R word in prepared remarks to Congress. And it did not come up in Q&A follow-up questions that I have seen.