Every American knows Joe Biden, and most have at least some idea of how his administration’s policies affect the country’s consumer price inflation. However, most have not heard of the man who runs the organization at the head of most of our inflation woes, Jerome Powell, the Federal Reserve Bank chairman.
America’s central bank is printing money at staggering record rates, even as the Consumer Price Index just hit a three-decade high of 6.2 percent, more than triple the Fed’s claimed target inflation rate of 2 percent. Even though the Fed shows no signs of slowing down the printing, Biden strongly considers reappointing Powell as chair when his current term runs out next February.
Powell’s potential reappointment is drawing an interesting mix of politicians. Sen. Elizabeth Warren (D-MA) leads a group of progressive lawmakers who want Biden to change the Fed’s leadership. Several Republican senators have been supportive of another Powell term, likely because of concern about the sort of radical leftist Biden would likely choose as a replacement. The downside, of course, is that Republican support for another Powell term might put the stain of perceived endorsement of Powell’s loose monetary policies on the party.
Famed economist Milton Friedman is well known for his assertion that inflation is “always and everywhere a monetary phenomenon.” As the money supply explodes, the country sees too much currency chasing too few goods. Diminished domestic production and supply chain crunches exacerbate the problem. The Fed has continued its “quantitative easing” policy that sends a flood of money into the economy even as the COVID pandemic has abated.
Since the pandemic began, the Fed has purchased some $120 billion each month in U.S. Treasury bonds and mortgage-backed securities. The risk of dangerous asset valuation bubbles in stocks, real estate, and financial instruments is becoming more concerning by the day.
This month the Fed announced that it would begin “tapering” its purchases by around $15 billion per month. Even at the proposed reduced rate, the Fed will still print and inject another $420 billion into the economy between now and next May, even as inflation is running extremely hot.
As things stand, Joe Biden’s massive $1.9 trillion COVID relief bill run through on greased rails in March still has almost $710 billion in allocated funds to be sent out in the current fiscal year and after.
Senate Republicans will do well to end their mixed messaging on inflation and make a real push to replace Powell next year with a new chair that they use all of their political power to vet and approve.