A few thoughts on this book:

“Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America” (2017) by Danielle DiMartino Booth

…

As America’s central bank, the Federal Reserve (“Fed”) is mandated to maintain price stability and maximize employment. Its tools are short-term interest rates and the money supply. Good luck! 

Paul Volcker’s Fed (1979-87)* did not believe in luck. It inherited stagflation from the 1970s. Having graduated cum laude from the Main Street, Volcker was street-smart enough for a tough fight. Willing to pay the price of a brief recession, his Fed raised interest rates (i.e. tightening the money supply), followed by President Reagan’s tax cut (i.e. cutting government spending). This deleveraging “shock treatment” took stagflation out of the equation, which was quite a tour de force on the supply side. Employment and demand were back, upsetting more than a few hardcore Keynesians. Reaganomics was on the rise while the Soviet economy was collapsing. Volcker’s Fed meant something.

Today Jerome Powell’s Fed means nothing but a money-printing press, reminding us of the Fed under Alan Greenspan, Ben Bernanke, and Janet Yellen before him. Powell et al. didn’t get the memo that we should never take global faith in our greenback for granted. We know that the CCP regime has all along been busy hunting assets around the world. Beijing bets that in the long run assets will trump paper money, no pun intended.

We have to be asset-competitive. Fortunately we already have an asset far greater than the money-printing press. That asset is America. Let’s not crush America with mountains of bad debts. Bad debts are always paid off with the future of good people. 

Powell, however, is buying up junk bonds these days #(Financial Times, April 12, 2020), whereas countless small business owners are facing pandemic-induced bankruptcy.@ If this is not moral hazard, tell me what it is.

America will do better without a bad Fed.

——Lingyang Jiang 

Footnotes:

*The stock market crash of 1987 (Black Monday) occurred two and a half months after Volcker left the Fed for good. The New York Times reported that Volcker took the crash in his stride but worried aloud that America was going from a creditor nation to a debtor nation.

# Is Powell following Section 13(3) of the Federal Reserve Act? Color me skeptical. I understand that his move has a “positive” impact on the Dow. Still, despite ZERO rates, the money market outperforms the stock market by a wide margin. Interesting. Or alarming.

@The Paycheck Protection Program under the CARES Act does not cover bankruptcy.