Fed chief inadvertantly makes the case for re-electing Trump
Like every Fed chief, President Trump's appointee to the slot, Jerome Powell, is studiously apolitical and circumspect. He often infuriates Trump, who then rage-tweets about him, but I've always been satisfied with him. Trump probably is, too, given that he hasn't told him, "You're fired."
Powell did us a service on Sunday speaking to widely watched 60 Minutes and telling us in recognizable language how he sees the economy going. Dollars to donuts, a lot of people watched. He began with the obvious:
SCOTT PELLEY, CBS NEWS / 60 MINUTES: There's only one question that anyone wants an answer to, and that is: when does the economy recover?
JEROME POWELL, CHAIRMAN OF THE FEDERAL RESERVE: It's a good question. And very difficult to answer because it really does depend, to a large degree, on what happens with the coronavirus. The sooner we get the virus under control, the sooner businesses can reopen. And more important than that, the sooner people will become confident that they can resume certain kinds of activity. Going out, going to restaurants, traveling, flying on planes, those sorts of things. So that's really going to tell us when the economy can recover.
He acknowledged the economic pain out there and pointed out that the economy would eventually recover, even if he, like everyone else, didn't have a timeline for it, though he did call the beginning of an economic recovery in the second half of 2020 "a reasonable assumption."
PELLEY: People have talked about a V-shaped recovery. The sharp downturn and then rocketing right back to where we were. What is the likelihood of that?
POWELL: Yeah, there're letters. People are fascinated by the possibility of different letters. And it's, again, really hard to say because it depends so much on the path of the virus. I will say that it's a reasonable assumption that the economy will begin to recover in the second half of the year, that unemployment will move down, that economic activity will pick up.
The markets since then have decided that that was "reasonable," and the futures market has since rallied 400 points at last reading.
Here's the part that makes the most sense as an inadvertent endorsement for President Trump:
PELLEY: 25% is the estimated height of unemployment during the Great Depression. Do you think history will look back on this time and call this the Second Great Depression?
POWELL: No, I don't. I don't think that's a likely outcome at all. There're some very fundamental differences. The first is that the cause here — we had a very healthy economy two months ago. And this is an outside event, it is a natural disaster, in effect. And that's one big difference. In the '20s when the Depression, well, when the crash happened and all that, the financial system really failed. Here, our financial system is strong has been able to withstand this. And we spent ten years strengthening it after the last crisis. So that's a big difference. In addition, the last thing I'll say is that the government response in the '30s, the central banks were trying to raise interest rates to keep us on the gold standard all around the world. Exactly the opposite of what needed to be done.
In this case, you have governments around the world and central banks around the world responding with great force and very quickly. And staying at it. So I think all of those things point to what will be — it's going to be a very sharp downturn. It should be a much shorter downturn than you would associate with the 1930s.
He pointed out that the economy was great before the coronavirus and there were no structural issues, so when the crisis was over, it would move back to going back to its natural state. In other words, this wasn't like the big structural meltdowns of past recessions. This wasn't some policy that went wrong — overspending, bank failure, currency meltdown — or any of the things that have the makings for real depressions both here and abroad. The structure was great, and the U.S. just got hit by an unexpected hurricane. It would skew back to what it was if nothing else changed.
This would have to assume nothing else changes. The good economy he's describing is the Trump economy, the economy that roared in the wake of President Trump's policies.
Changing those policies, as Joe Biden vows to do — and putting Alexandria Ocasio-Cortez in charge of energy policy is pretty much what he means — would open the door to structural problems, the things that really do create depressions.
That has to be an endorsement of President Trump from the Fed chief. Policies are what create depressions, not natural disasters, and Joe wants to remake policies.
Trump doesn't. His roaring economy brought on by tax cuts and deregulation is the policy. He just wants to get rid of the coronavirus.
Maybe that's the real reason markets are rallying — it certainly would explain why the left is so hell-bent on downplaying the things Powell said.
Fox News's business maven Charles Payne sees what's going on:
Its early but Dow Jones Industrial futures +400 points. Note, although last week major indices were lower Thursday and Friday exhibited the kind of reserve that triggered the April breakout.— Charles V Payne (@cvpayne) May 18, 2020
Don't worry the experts & many in media have all morning to try to talk market lower.
— Charles V Payne (@cvpayne) May 18, 2020
Image credit: Federal Reserve, via Wikimedia Commons // public domain