Credit Bubble Bulletin/Doug Noland/11-4-2022
“Powell’s head was elsewhere, perhaps drawing inspiration from the resolve Paul Volcker had demonstrated some 40 years earlier. I respect and admire Powell. His Fed has made historic mistakes, but he’s determined to try to make amends. The Chair is doing what he knows is in our nation’s best interest. He’s willing to take the heat.”
USAGOLD note: Though Noland applauds the Fed chairman as drawing inspiration from Volcker, others see him as charting a policy that comes closer to that of Arthur Burns during the 1970s. Contrast Noland’s take above with the following from Henry Kaufman, the long-time Fed analyst: “I am still waiting for him to act boldly. Today, the inflation rate is higher than interest rates. Back then, interest rates were higher than inflation rates. It’s quite a juxtaposition. We have a long way to go. Inflation has to come down or interest rates will go higher.” Raising rates, in and of itself, is not necessarily hawkish (or Volckerian for that matter). The central banks of Argentina, Venezuela, and Zimbabwe have been raising rates for years, yet their inflation rates are now 70%, 167%, and 257%, respectively, and climbing. No one would be so foolish as to characterize their central banks as hawkish (or channeling Paul Volcker).
