Fed Chair Jerome Powell sat down for an extremely rare interview on the “Today” show Thursday. NBC’s “Today” headlined the story with a quote from the Fed Chair:
There’s nothing fundamentally wrong with our economy
But if that’s true, it seems odd to have the historically reclusive Fed Chair sit for a live interview on the “Today” show. Even a Fed chair interview on CNBC should have raised eyebrows. This interview in itself is an ominous sign.
Further, that message didn’t jive at all with the rest of Powell’s commentary. He was there to defend the Federal Reserve’s unprecedented emergency measures.
He also tried to assure the American people that the Fed has a virtually unlimited supply money to pump into capital markets. Powell consoled viewers that the Fed is “not going to run out of ammunition” in the fight against this recession.
NBC’s Savannah Guthrie started off by asking Powell to define any limits to the Federal Reserve’s power to create money, and its willingness to do so in the coming months:
The Federal Reserve doesn’t exactly print money, but as one writer put it, you do have the ability to conjure money out of thin air. My question to you is simple. Is there any limit to the amount of money the Fed is willing to put into this economy to keep it afloat? Is it a blank check?
We do have the ability to essentially use our emergency lending authorities. And the only limit on that will be how much back stop we get from the Treasury department.
So far that’s meant a $4 trillion expansion of the Fed’s balance sheet, on top of the $2 trillion stimulus bill in Congress. It’s a gargantuan $6 trillion intervention in the economy.
Guthrie also asked about the risks associated with so great an intervention:
What are the risks associated with taking some of these bold actions? Pumping so much money into the economy? One issue, of course, would be worrying about inflation. Is there a long term risk to the actions being taken now?
Powell waved the objection off:
We don’t really see that. What we see though is small, medium, and large businesses are not able to borrow through their normal channels… so we step in and replace that… we’re providing stability.
That sounds like something is fundamentally wrong with the economy. U.S. workers face mind-boggling unemployment. The Fed Chair is overseeing an intervention nearly four times the size of QE1 during the 2008 Financial Crisis.
The purpose of messages like this from the Fed Chair, and the recent message from the FDIC Chair, is to calm people down. But they due give cause for trepidation.