Biden Already Blames Powell For The Democrats’ House And Senate Losses In November
By Eric Peters, CIO of One River Asset Management
Powell reluctantly turned on the television, Biden’s press conference underway.
“Covid-19 has created a lot of economic complications, including rapid price increases across the world economy. People see it at the gas pump, the grocery stores, elsewhere,” said America’s president, panicked, but careful, staying on script. “The Federal Reserve provided extraordinary support during the crisis for the previous year and a half,” continued Biden.
“Given the strength of our economy and pace of recent price increases, it’s appropriate – as Fed Chairman Powell has indicated – to recalibrate the support that is now necessary.”
Stock markets extended losses, the most speculative assets suffering horribly. “The critical job of making sure elevated prices don’t become entrenched rests with the Federal Reserve, which has a dual mandate: full employment and stable prices,” explained Biden, carefully pre-apportioning blame to the Fed Chairman for the Democrat’s House and Senate losses this coming November.
Powell drifted back to simpler times, in 2018, when his job was easy, but his boss would berate him. “I’m just saying this: I’m very unhappy with the Fed because Obama had zero interest rates,” Trump told the WSJ in October 2018, “Every time we do something great, he raises the interest rates.”
Powell considered how profoundly times had changed. In his 2018 hiking cycle, it took 225bps of rate hikes to tank stocks.
But that was before Covid-19, economic collapse, and vast deficits, funded by the Fed. It was before inequality soared to levels previously undreamed of. Before supply chains were impaired, auto and house prices surged, inflation hit 7%, and real wages contracted.
And it pre-dated the breathtaking hyper-financialization of the US economy, which meant that even talking about rate hikes now produces wild market swings.
Such is the precarious state of financial markets that their prices are falling sharply because the Fed is verbally tightening, even as it is still actually easing. And Powell quietly wondered what his new boss would demand he do, if markets were to plunge, while inflation remains near 40yr highs.
Sun, 01/23/2022 – 17:50