However constitutionally flawed the Federal Reserve is, the central bank's independence has proven time and time again to lead to a pragmatic decision-making body, at least relative to the chaos coming from Congress and the White House. And while we already know that politicians would happily manipulate America's money supply for electoral gain if they succeed in wresting control from the Fed, the latest Senate Banking Committee hearing proves just how reckless the members of the world's (supposedly) greatest deliberative body are when it comes to questions of monetary policy.
The most moronic of the Senate's monetary wannabees is Sen. Elizabeth Warren (D-MA), who repeatedly tried (and, thankfully, failed) to browbeat Fed Chairman Jerome Powell into halting his crucial rate hike campaign prior to last year's midterm elections. Magical Modern Monetary Theory adherents such as Warren got to put their delusion to the test in the form of the Fed expanding the money supply by more than 40% from 2020 to March of last year. The result: the worst inflation crisis in 40 years, with inflation three times higher than the Fed's acceptable benchmark and rising.
BIDEN LET DEMOCRATS WALK THE PLANK FOR NOTHING
Warren, of course, used the opportunity with the Fed chairman to reiterate her economic illiteracy and appeals to pathos.
"Chair Powell, if you could speak directly to the 2 million hard-working people who have decent jobs today who you’re planning to get fired over the next year, what would you say to them? How would you explain your view that they need to lose their jobs?" Warren asked Powell.
This rhetorical question reveals just how little Warren understands Powell's perspective. It's not really the lack of job losses that Powell laments, but rather the lack of competition in the job market. Baby boomers who were able to cash out of the workforce thanks to pandemic-era quantitative easing artificially boosting their home values have left the workforce smaller than it should be, resulting in inflation and allowing the existing workforce to be less productive. Furthermore, the worse the labor shortage remains, the worse the wage-price spiral.
The monetary inscience isn't exclusive to Democrats, though Warren may be the most shameless. Sen. John Kennedy (R-LA) struck a similar note.
"I’m not being critical — when you’re slowing the economy, you’re trying to put people out of work," Kennedy asked Powell. "That’s your job, is it not?"
While the Fed has maintained a stubborn allegiance to the Phillips Curve, the current labor market, as Powell has explained, is so hot that the pain of rate hikes may not mean much higher of an unemployment rate, especially if premature retirees don't buck up and return to the workforce. In normal times, Powell could be challenged for overemphasizing the "full employment" portion of the Fed's dual mandate, but that's not the problem here when price stability and thus price signaling have been broken for three years now.
As evidenced by the Fed's actions over the years, it is far from perfect. But even now, it remains more thoughtful and less moronic of a decision-making body than the cretins in Congress.