{"id":76176,"date":"2017-11-06T17:03:22","date_gmt":"2017-11-07T00:03:22","guid":{"rendered":"https:\/\/dh.durangoherald.com\/tj\/samuelson-welcome-to-the-jerome-powell-era-at-the-fed\/"},"modified":"2017-11-07T00:03:22","modified_gmt":"2017-11-07T00:03:22","slug":"samuelson-welcome-to-the-jerome-powell-era-at-the-fed","status":"publish","type":"post","link":"https:\/\/dh.durangoherald.com\/tj\/samuelson-welcome-to-the-jerome-powell-era-at-the-fed\/","title":{"rendered":"Samuelson: Welcome to the Jerome Powell era at the Fed"},"content":{"rendered":"
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du1-i-syn<\/span><\/figcaption><\/figure>\n

Almost by definition, he instantly becomes the most important economic policy-maker in the world. But who is he? Outside economic circles, hardly anyone knows. So let\u2019s catch up.<\/p>\n

Powell would be the first non-economist to head the Fed since the disastrous appointment of G. William Miller by President Carter in 1978. But parallels are strained. Even many economists don\u2019t believe academic credentials are essential.<\/p>\n

\u201cSetting monetary policy (interest rates and credit conditions) in most economic environments is pretty straightforward, and I don\u2019t think a Ph. D. from an Ivy League school is needed,\u201d says economist Mark Zandi of Moody\u2019s Analytics, who has a Ph. D. from the University of Pennsylvania.<\/p>\n

More to the point, Powell, a lawyer by training, has spent most of his life steeped in financial markets. A Republican, he served as a top Treasury Department official in the administration of George H.W. Bush. President Obama nominated him for a spot on the Fed Board of Governors, which he filled in 2012.<\/p>\n

The Fed\u2019s immediate focus is how to sustain the economic recovery without having low interest rates fuel inflation or financial speculation. To defeat this problem, the Fed has been gradually raising overnight interest rates since late 2015. Rates have gone from about zero to their current range of 1 percent to 1.25 percent. In addition, the Fed is reducing its massive holdings of bonds.<\/p>\n

So far, the transition to higher interest rates \u2013 presided over by Janet Yellen, the Fed\u2019s present chair \u2013 has gone smoothly. Powell has consistently backed Yellen, suggesting much continuity. Still, there are no guarantees. Interest-rate increases could backfire. Again, here\u2019s Zandi.<\/p>\n

\u201cUnemployment seems destined to fall below 4 percent, creating inflationary wage and price pressures,\u201d he says. \u201cInvestors expect interest rates to rise, but not nearly as much as Fed members do, and I suspect the Fed will be right. Guiding investors\u2019 interest-rate expectations higher without triggering a major sell-off in global stock, bond, and commercial real estate markets will be tricky.\u201d<\/p>\n

There are bound to be surprises. Some economists worry that passage of the Republican tax cut will overstimulate the economy. To combat the resulting inflationary pressures, the Fed would raise interest rates faster than it intended. This might cause an economic slowdown or recession.<\/p>\n

Among those who have worked with Powell, there\u2019s much good will. William Hoagland, a Republican and senior vice president at the Bipartisan Policy Center, where Powell worked for several years, praises him: \u201cHe\u2019s a standup guy, a solid individual. He\u2019s easy to talk with.\u201d<\/p>\n

There are questions, of course. Will Powell be stigmatized as a creature of Wall Street? He\u2019s not poor. Citing a recent financial disclosure form, The Washington Post put his net worth between $20 million and $55 million.<\/p>\n

Will he protect the Fed\u2019s vaunted independence? In an important new book, political scientist Sarah Binder and hedge-fund manager Mark Spindel argue that the Fed\u2019s independence is overstated (the book\u2019s title: The Myth of Independence).<\/p>\n

Binder and Spindel suggest a political cycle: When the economy is doing well, Congress ignores the Fed; when the economy stumbles, it tends to blame the Fed \u2013 and restrict its powers or require more accountability. Powell has pronounced himself against many recent proposed restrictions (for example, a requirement that the Fed set interest rates according to a formula).<\/p>\n

The biggest question mark involves Trump. In a presidency that has been full of surprises and vitriol, relations between the White House and the Fed have been remarkably calm and monotonous. There have been no personal attacks or vicious tweets.<\/p>\n

But is Trump planning to remake the Fed according to his own priorities? Does he think that, of all the plausible candidates for the Fed chair, Powell would be the easiest to influence or intimidate?<\/p>\n

Or are we just watching the Binder-Spindel cycle in action? Why criticize the Fed when the unemployment rate is declining and the Dow Jones is rising? But what happens when the day comes, as it will, when the unemployment rate rises and the Dow Jones falls?<\/p>\n

The Powell Fed may be less boring than we now imagine.<\/p>\n

Robert Samuelson is a columnist for The Washington Post. \u00a9 2017 The Washington Post Writers Group<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

du1-i-syn Almost by definition, he instantly becomes the most important economic policy-maker in the world. But who is he? Outside economic circles, hardly anyone knows. So let\u2019s catch up. Powell would be the first non-economist to head the Fed since the disastrous appointment of G. William Miller by President Carter in 1978. But parallels are […]<\/p>\n","protected":false},"author":1,"featured_media":76177,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"tags":[125],"naviga_topic":[],"class_list":["post-76176","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-newsletter-opinion"],"acf":[],"author_name":"dh_admin","_links":{"self":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/76176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/comments?post=76176"}],"version-history":[{"count":0,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/76176\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media\/76177"}],"wp:attachment":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media?parent=76176"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/categories?post=76176"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/tags?post=76176"},{"taxonomy":"naviga_topic","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/naviga_topic?post=76176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}