The formal recession has yet to be declared, and Powell is already offering apologies. Following last week’s rate hike amid the ongoing banking turmoil, during the Q & A session, the Fed Chair offered a sort of apology for recent events:
… I’ve been Chair of the Board for five plus years now, and I fully recognize that we made mistakes. I think we’ve learned some new things, as well, and we need to do better.
Herein lies just one of the features of the system: it demands expertise to accomplish the impossible, be it an unworkable calculation or striving to obtain unattainable knowledge. Powell and the Fed not only fail to achieve their intended goals but also exacerbate the situation through their meddling in the market.
Given that the problem is inherent to the existence of both the Fed and the fractional reserve banking system, and since a significant part of the issue revolves around customer bank withdrawals, other than lending more money to banks, there are few viable solutions the Fed could do to prevent a banking crisis. Powell doesn’t provide many recommendations beyond apologizing and promising a better future.
He continues to rely on hope as a guide, but his words don’t exude confidence:
So I think that -- I think it’s still possible. I -- you know, I think, you know, the case of avoiding a recession is, in my view, more likely than that of having a recession. But it’s not -- it’s not that the case of having a recession is -- I don’t rule that out, either. It’s possible that we will have what I hope would be a mild recession.
More hope is offered as a viable alternative to sound economic advice, as seen by the never-ending quest to bring (price) inflation metrics back down to 2 percent. According to the Chair:
We have a goal of getting to 2 percent. We think it’s going to take some time. We don’t think it’ll be a smooth process. And, you know, I think we’re going to - - we’re going to need to stay at this for a while.
And so, the notion of implementing rate cuts is easily dismissed:
So we -- on the Committee, have a view that inflation is going to come down, not so quickly, but it’ll take some time. And in that world, if that forecast is broadly right, it would not be appropriate to cut rates, and we won’t cut rates.
Beyond his optimistic forecasts, he also commented on the issue of the debt ceiling, even though it falls outside of his job description:
I would just say this: It’s essential that the debt ceiling be raised in a timely way so that the US government can pay all of its bills when they’re due.
It’s worth noting that raising the debt ceiling effectively undermines the purpose of having a debt ceiling in the first place, yet this is often overlooked by central planners.
With a new banking crisis almost every week, Powell’s optimism about a brighter future seems increasingly disconnected from reality. For now, pursuing the inflation target remains a top priority, so the idea of rate cuts is still not on the table. However, we must keep in mind that priorities can and will change at a moment’s notice. Making an apology this early doesn’t bode well, and we should expect many mistakes and apologies to come.
