Will JPOW go down in history as the worst FED Chairman of all time?
A buddy and I were talking. He believes that JPOW will go down in history as the worst fed chair for a myriad of reasons. His points were:
- We've had 2 recessions underneath him, he caused 1 of them.
- We had 3 stock market crashes underneath him, he caused 2 of them. (Taper Tantrum 2018 - Inflation Crash 2022)
- We've had the highest then lowest unemployment rate underneath him.
- We continue to have highest inflation in decades, which he caused.
- He sat down and watched inflation go from 1.50% to 7% and said it was 'transitory'
- My buddy also hypothesized that it's likely he'll cut rates too late and destroy the economy (like Greenspan in GFC).
- He continued to print money after a vaccine was developed and the economy re-opened (2020).
I understand this thesis, however, it seems a little unfair to JPOW. He faced unprecedented crises (I.e COVID) and if he didn't react with dramatic policy, we may have still been recovering from the COVID crash 3 years later. Let's see if he can conquer inflation.
I think that if JPOW can kill inflation without a recession (extremely unlikely), then he may be the greatest fed chair of all time in my opinion, as it's never been done before. If he does cause a 2008-type recession, then I think it's safe to say that he's the worst.
And I'm afraid the textbooks in the future aren't going to shy away from discussing his massive mistakes, which won't make him look great at all.
You either die a hero or live long enough to see yourself become the villain…
Hey man, interesting discussion you had with your buddy. I see both sides of the argument, but I tend to lean towards your point of view that it's a little unfair to completely blame JPOW for all of these crises. I mean, he did inherit a tough situation with the COVID pandemic and had to take bold actions to prevent a prolonged economic downturn.
Sure, he made some mistakes along the way, but it's not like he was acting recklessly or without consideration for the consequences. He was trying to balance a lot of competing priorities and make the best decisions he could with the information available at the time.
I would add that in the labour market you tend to get what you pay for.....
1. Is the expectation that we never have any recessions ever? Also, look at the labor prints in the last few months: doesn't feel much like a recession yet.
2. Dumb metric to judge a Fed Chair unless stock market crashes cause financial stability risk
3. So? Is Ben Bernanke a worse Fed Chair than Yellen because he presided over lower (2006) and higher (2009 say) unemployment than she?
4. Not all of it is his fault: even besides the "Team Transitory" arguments like supply chains et al, Powel didn't pass the later stimulus bills that probably weren't necessary viewed after the fact.
5. Degree of the jump in inflation has nothing to do with whether it's transitory or not.
6. Could be, jury is still out. I would add that it wasn't Greenspan's Fed (who left in '06 and basically never hiked rates at all) but Bernanke's. That basic error raises a lot of questions about the above arguments.
7. Lol, the economy didn't re-open in 2020. Any service-based business was still getting killed and the Rx bankers were still getting worked to death well into 2021. Your friend needs to look back at OpenTable data or GS mobility index and the like. This feels like him applying a partisan COVID skeptical lense where it doesn't belong. The point at which you can start having this whole conversation seriously is late 2021/early 2022 when stuff like shipping containers and used cars were no longer ripping, but the labor market was still strong.
I don't mean to write a Jpow hagiography here, but I don't take many of these seriously either. It's too early to write the Jpow autopsy. Monetary policy has an 12-18 month lag so we fundamentally don't know if 4x75bps plus these recent hikes is enough/too much/just right/too late.
I'll agree we cant nail down JPow's epitaph until this cycle fully plays out.
But bc of monetary lags, it's like we are driving at 120 mph, out of control too fast. We need to brake, but the brake has a 10 second delay. We have no idea how much pressure to put on the brake and we will have zero feedback until it's too late.
If we were at a controllable speed, say 60, then the stakes wouldn't be so high. But Powell put us in this position by completely f-ing up monetary policy in FY 2021 and early 2022.
If we slow the car down back to 60 without causing an accident, Powell may actually end up being hailed as a hero (for avoiding an accident...in a dangerous situation he put us in)
But I would argue it will pure luck as there is no repeatable way to make the right decision here - given the situation we are in.
Of course, I think the odds of an accident (braking too hard or braking too soft) are by far the most likely outcomes.
I just don't agree that he "put us" there. I'd look first at the lame duck stimulus package in Dec 2020 and then the Biden stimulus package in Spring 2021. Back to policy lag, these things got out the door and into the economy quicker than did rate policy, which is supposed to affect the economy through investment decisions mostly.
Once you factor in fiscal policy and the supply side (lower labor force participation -> labor shortage, high fossil fuel prices - WTI was in the mid 90s up 60% YoY before the invasion), the inflation story seems a lot less about the Fed than you put it (of course there's still something).
However, I take your point that there is a risk to running the economy hot when the Fed is the main mechanism to slow it down. Monetary policy is a blunt instrument and hiking quickly creates a lot of problems.
TLDR: POWELL WAS DOING QE THE ENTIRE TIME INFLATION WAS SPIKING FROM 2% to 8%. THAT IS UNFORGIVABLE AND THE WORST POLICY IMAGINABLE.
WORST FED PRESIDENT EVER. EASILY.
From Feb 2021 through Feb 2022 - Powell saw a massive increase in inflation. 12 month CPI went from under 2% in Feb 2021 to nearly 8% in Feb 2022 (THIS IS BEFORE RUSSIA/UKRAINE).
There was a brief period where core inflation went from 4.5% down to 4.0% (June - Sep) and maybe the Fed could make the case inflation was moderating. Doing nothing through Sep is forgivable.
But AT LEAST they needed a contingency plan to move quickly if inflation spiked back up. And sure enough in October, inflation (core and otherwise) flared back up and kept increasing at an ever rapid pace.
What did the Fed do from October through March - as they watched inflation keep rising from 5.5% to 8%?? Not only did they not raise rates until March 2022...THEY KEPT BUYING TREASURIES AND MORTGAGE BONDS. THEY WERE DOING QE THE ENTIRE TIME INFLATION WAS SPIKING FROM 2% to 8%. THAT IS UNFORGIVABLE.
100% this; the entire situation has been mismanaged. Whether incompetence or malicious intent I'm not sure (either one is incredibly concerning).
Angry folk on here. I think post Greenspan, the fiscal policy/monetary policy never diverge anymore so every Fed president is weak and not good at all.
Truly if the Fed was doing it's job over time fiscal policy would adapt to monetary policy. That does not seem to occur ever and other way now (this is bipartisan).
We're being civil on here i would say.
As for your point, remember when Trump wanted to replace Powell because he continued the Yellen policy of hiking?
Also, what about the Taper Tantrum?
Yes, but not for the reasons the consensus online thinks.
His continued hawkishness/tightening in the face of leading data (sorry inflation is done and has been done plenty of leading data on this outside of lagging CPI) and a lack of understanding leads & lags to policy will place him in the history books as the worst chairman of all time.
He's fallen into Bill Dudley's trap of thinking CPI has positive correlation to equity prices and that he must jawbone down the market. This will ultimately backfire on them in BOTH directions...
Ben helicopter money Bernanke.
Easy easy choice.
But honest answer is all of them.
this post reminds me of when parents prohibit their toddler to eat too many sweets, and the toddler cries and says his parents are the worst
This is dumb. Everybody knows Putin caused the price increases, not our monetary or fiscal policy. #putinpricehikes
JPow is going to go down as the third greatest Fed Chair, after Volcker and Greenspan. But at the same time, most Fed Chairs before Volcker were regulatory captured by the executive branch and Treasury. Then theres Janet Yellen who faced pretty much no adversity during her term. Volcker saved us by winning against the great inflation which lasted almost two decades, and Greenspan had the 1990s roaring, including engineering a soft landing after the 94 recession. I think Jpow made mistakes re: transitory but I dont consider covid stimulus a fuck up, hindsight is 20/20 on that front. I dont think he will be able to engineer a soft landing this time, but he has went through a lot during his tenure and I think long term we will see him as beating inflation by any means, like his idol Volcker,  and keeping the US and thereby the worlds financial markets in relative order during a global pandemic. That in itself is kind of legendary.
Democrats caused inflation by overreacting to the Chinese flu.
And before someone yells “1 gorillion deaths!”, how many people would be dead from the vax if we counted everyone who died 28 days after first receiving it? Also those death statistics don’t even line up with CDC IFR (~0.3%) and total cases (103M). Why?
Congrats in advance on your Darwin award.
Yes, easily the worst. For 10 years he has been reactive, not proactive. Seems like the guy is incapable of learning from his mistakes or taking a firm policy position on something before it becomes a crisis. TLDR: no foresight or balls.
bro janet yellen and bernanke will go down as the WOATs. QE fractured society slowly and textbooks will be written about how insane it and the 2% inflation target was
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