The Morning Rant

The machinations of the Federal Reserve is the ultimate in government "inside baseball." And the arrogance of the typical Federal Reserve governor is breathtaking, even by the lofty standards of the federal government. They confidently pontificate about the most complex economy on earth...predicting months and years out, as if they, and they alone, have the combination of intellect, education, experience and, for all we know, a conduit to God, that allows them to predict events that are affected by many thousands of activities that are unknowable by mere humans.

And if that weren't bad enough, they also have the power to manipulate the financial markets based on those confident predictions. They control short-term interest rates, they control the raw amount of money in the economy (quantitative easing anyone?), they control reserve requirements for banks, they buy and sell bonds to manipulate money supply and rates, all while being almost perfectly independent of any oversight!

Sounds like a great gig! Too bad they screw it up...a lot! There are very little data that show that their efforts are better than economies that are not controlled by a central bank. The goal of smoothing out the business cycle sounds laudable, but they cannot show that it helps in the long run. Their data are purposefully opaque, and as most of us have discovered, they constantly change the definitions of the very things they are tasked with controlling...namely inflation.

So the nomination of Kevin Warsh seems like a very good idea. His public opinions suggest that he is a Fed sceptic, and perhaps will throttle down the insane manipulation of the American economy by a bunch of unelected wonkish bureaucrats who hide behind their pseudo-intellectualism while being covertly political.

Kevin Warsh Wants an Overhaul of the Fed—Here’s What That Could Look Like

Warsh said in October 2024 that the central bank has routinely shifted the goalposts for measuring inflation—from average inflation targeting to core inflation ex-housing—and how it conducts policy.

“They don’t seem to have a serious theory of inflation that is theoretical and empirical. It is not obvious that they acknowledge what their role is in prices,” Warsh told CNBC’s “Squawk Box.”

“I think in a world this dangerous, an economic policy where fiscal policy is irresponsible, the central bank needs to be very clear about its reaction function, be clear about its goals, and not look like it is lurching—that’s what put us in the mess we have.”

“Moving markets with rolling Fed incantations is tempting, but unhelpful to the Fed’s deliberations, and ultimately, to its mission,” Warsh said last year.

“The central bank should find new comfort in working without applause and without the audience at the edge of its seats.”

[Crossposted at CutJibNewsletter and X/Twitter]. If you folks who are on X/Twitter would follow us it would be much appreciated!

posted by CBD at 11:00 AM

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