Lobby for re-election of Powell as Fed chairman

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Jerome Powell’s tenure as President of the US Federal Reserve could be summed up as follows: never in economic history has we given so quickly so little.

The trillions of dollars injected into the financial system by the Fed since March 2020 have sent the stock market to record highs, raising the wealth of multi-billionaires such as Elon Musk and Jeff Bezos to stratospheric heights, as well as the wealth of a host of lesser lights.

Federal Reserve Chairman Jerome Powell (AP Photo / Susan Walsh)

Given this record, it is hardly surprising that voices are rising in political, media and financial circles to call on President Joe Biden to reappoint Powell upon the expiration of his four-year term in February of the next year.

This week on Financial Time reported that Brad Sherman, a Democrat in the California House of Representatives, “was saying what a lot of his party members believe in private” when he told the paper that Powell should be reappointed for a second term.

Powell was nominated by Trump after deciding not to re-approve Obama’s Janet Yellen nomination, although he called his performance “brilliant.” During Powell’s first term in office, he had a somewhat turbulent relationship with Trump due to the former president’s insistence that he cut interest rates and even resume quantitative easing for make sure the stock market progresses.

Amid a brief recovery in the global economy in 2017-18, when growth rates were at their highest since the run-up to the 2008 financial crisis, Powell embarked on a policy of marginal monetary tightening. In 2018, he raised interest rates four times in 0.25 percentage point increments and signaled that further hikes could occur the following year. He also indicated that the Fed would begin to reduce its holdings of financial assets at the rate of $ 50 billion per month.

Wall Street sided with Trump and brought Powell back into line. In January 2019, after the worst December for Wall Street since the Great Depression, Powell made it clear that further interest rate hikes were not an option, and in July of the same year he began to push them. reduce.

After cracking the whip, Wall Street warmed up to Powell following its response to the near-collapse of the financial system in March 2020, when the Fed injected $ 4 trillion – one estimate is that the bank US powerhouse was providing money at the rate of a million dollars per second during the height of the crisis – and has established itself as the backstop of all financial markets, including the purchase of stocks for the first time in the history of the Fed.

Since then, the Fed has provided monetary support in the form of asset purchases of $ 120 billion per month, or more than $ 1.4 trillion per year, while keeping its base interest rate close to zero. Powell initiated a major policy change last December when the Fed decided it would continue its support even if inflation exceeded its target rate of 2.0%.

While the Main Democrats have yet to commit to Powell, and some have criticized the easing of bank regulation under his watch, they are leaning in that direction.

In a recent interview with commercial channel CNBC, Treasurer Yellen, when asked if she would recommend Powell for a second term, said she would have a “talk” with Biden on the matter, and made it clear that she would be recommending Powell for a second term. ‘in his opinion, “the Fed has done a good job.

Meanwhile, there are expressions of support for Powell on Wall Street and in the financial press.

Bloomberg commentator Matthew Yglesias wrote that until recently he believed Biden should follow Trump’s lead and replace Powell with a Democrat. But now he had changed his mind and thought “Biden should end the speculation as soon as possible and announce another term for Powell.”

“The task of replacing Powell presents great risk with little benefit. For now, Biden should end the discussion and make it clear that Jerome Powell is his man, ”he concluded.

Last week, NBC reported on some revealing comments from Mitchell Goldberg, chairman of asset management firm ClientFirst Strategy, which no doubt reflected widely held views on Wall Street.

Powell, he said, was a known quantity, whose political trajectory aligned with current Wall Street interests. “Powell is respected by market players for his availability, his openness and his good understanding of the global economy. Not to mention that investors prefer money printing and patience to tightening monetary policy too soon. “

Robert Perli, head of global research at Cornerstone Macro, an economic research firm, made it clear in his comments to Financial Time that in his opinion, Powell’s reappointment would be a “safe course” to ensure the continued flow of money.

Under conditions of rising inflation, markets would likely question the ability of a potential new president to steer the Fed’s monetary policy governing body in accordance with its new framework, and “the result would likely be high rates. ‘higher interest’.

Powell’s reappointment was also supported by the forces of so-called left elements around the Democratic Party. Last May, founder and director of the Center for Economic Policy Research in Washington, Dean Baker, said it would be good for the economy if Powell was reappointed and Biden announced the decision “as soon as possible.”

Baker expressed his support in terms of the Fed’s goal under Powell to “manage the labor market as hot as possible without triggering inflation.”

The reference to the labor market, however, is a convenient left-wing cover for the real purpose of the Fed’s policy, which is to ensure that the flow of money to Wall Street continues and that the mountain of debt and debt continues. of fictitious capital is supported.

The AFL-CIO has yet to make its position known, but last May William Spriggs, the AFL-CIO’s chief economist, gave Powell the green light. “I hope he will be reappointed,” he said.

This support is important because, as Politics noted in his report on his comments, Spriggs is “often portrayed on the left as a potential choice to lead the central bank.”

Spriggs said people shouldn’t “take lightly” the importance of the Fed’s pro-worker shift under Powell, and “we need a little bit of stability at the Fed” after going through four years of Trump.

It is a measure of the perverted nature of what passes for economic analysis and discussion that the Fed’s policy of putting trillions of dollars in the hands of Wall Street oligarchs should be portrayed as pro-worker.

But then, we must remember, to understand the roots of this perversion, that the AFL-CIO and the unions as a whole have a material interest in ensuring that the financial markets are supported by the Fed, because they have become more and more dependent on the income they derive from their financial investments.


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