Fed Chair Powell “Doesn’t Stand A Chance”…” The truth is, Powell can’t win regardless of what he does.”
by MN Gordon via EconomicPrism.com,
ZeroHedge.com
Fri, 02/23/2018
Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job. He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer. He still doesn’t know what roach coach menu items induce a heinous gut bomb.
Yet across the planet, folks high and low are already telling him exactly how he should do his job. What’s more, they’re passing advanced judgement on things that may or may not happen. For example, the South China Morning Post recently offered the following opinion:
“President Donald Trump may have done Janet Yellen a favour by not giving her a second term as Chairwoman of the Federal Reserve. Her successor, Jerome Powell, may have inherited a poisoned chalice. The Fed will have to up the pace of U.S. rate hikes or risk accusations of being behind the curve as markets react to signs of rising inflation.”
When Powell showed up to work on February 5, for his first day on the job, the general consensus was that the Fed would raise the federal funds rate three times this year, at 25 basis points – or 0.25 percent – per increase. But now that consumer prices are rising at an annual rate of 2.1 percent, average hourly earnings are increasing at an annual rate of 2.9 percent, and Congress has passed a massive two year budget deal, twitchy economists are questioning if three rate hikes will be enough to keep inflation in check.
Over the last two weeks their chants for four rate hikes in 2018 have grown louder. Goldman Sachs has even floated the five rate hike scenario.
Alas, this is the sort of ridiculous minutia that policy makers and analysts must navel-gaze over in a planned economy. The truth is, Powell can’t win regardless of what he does.
Whether he raises rates three times or four times – or ten times – he’ll get it wrong. Here’s why…
Chronic Shortages
The economy is a complex living organism that’s continuously evolving and always subject to change. One relationship at one moment can be completely different at another moment. Supply and demand are incessantly adjusting and readjusting to meet the conditions of the market.
These continuous interactions provide a natural and efficient response to supply shortages and gluts. Even in a moderately free market economy, bakeries do not run out of bread when there’s a wheat crop shortage due to a late season frost. The shelves never go empty. Rather, the price of bread rises and consumers adjust their spending accordingly.
Centrally planned economies, on the other hand, are inclined to frequent, intensive and chronic shortages. Bureaucrats, armed with spiral bound planning reports and pie graphs, are incapable of fixing the proper prices for gumballs and gasoline by diktat. There’s simply too much going on and too many moving parts for them to consider.
With the best of intentions, the noble planner makes their best guess of the appropriate price control. Then things invariably go haywire.
The Rest…HERE
