I’m going to be really honest with you. I think you are going to be Right. I also think that if he does that then he will absolutely end up being remembered as Arthur burns 2.0 which makes zero sense for him legacy wise. Which leads me to my real question.
Do you think he cares more about his legacy right now, or his legacy when people look back in 20 years? Because if he cuts now, in this moment, he is securing Arthur burns status.
Unless the largest recession in quite some time is around the corner (possible) then cutting 3 times into the largest tariffs in 100 years is going to be a hell of a choice.
The point of the note is this the Bernanke Fed. Inflation is only a concern if it goes below 2%. The economy is divided into 2 halves. If he cuts he remains a hero of the upper half. His legacy on supporting markets is secured. The price stability mandate becomes a bigger joke by the day. Arthur Burns is a good outcome in this regime.
Legacy for the wealthy? I hope that isn't his calculation. I don't think any Fed chair in history has been remembered for the way they treated one half of the economy. They are remembered for what happened.
Now, all that said, I think J. Powell will do exactly that because he is “one of them,” as you are saying. But if he cares about his legacy AT ALL to the rest of the world and to history, he won't cut.
In my view, he has the choice to be remembered as Arthur Burns but worse, who capitulated to the most partisan president in memory, or he can preserve his legacy by standing up to that. That's a different view. What do you think of that? I'm trying to learn. I only came to markets truly around 2023, so I am trying to fully understand how much of a capitulator he is. Furthermore, I know he should have kept raising rates and folded to political pressure in 2018-19, I believe. Do you think this is the same?
Also, I am not ignoring the ZIRP era commentary. I think that is embedded into the conversation we are having. Is he willing to buck that trend, which everyone knows should have been bucked 10 years ago, but bankers like arbitrage and low rates because it makes their lives easy? Everybody gets a trophy investing. I guess he cant now. too much debt.
He seems to me, like you say, someone who doesn't shake things up, who can't take any real market turmoil without acting. But I am attempting to have a very well-rounded opinion. Thanks for your time and great piece!
This article is excellent. I completely agree with the final conclusion. Thank you for sharing it.
Thank you Rye.
I’m going to be really honest with you. I think you are going to be Right. I also think that if he does that then he will absolutely end up being remembered as Arthur burns 2.0 which makes zero sense for him legacy wise. Which leads me to my real question.
Do you think he cares more about his legacy right now, or his legacy when people look back in 20 years? Because if he cuts now, in this moment, he is securing Arthur burns status.
Unless the largest recession in quite some time is around the corner (possible) then cutting 3 times into the largest tariffs in 100 years is going to be a hell of a choice.
The point of the note is this the Bernanke Fed. Inflation is only a concern if it goes below 2%. The economy is divided into 2 halves. If he cuts he remains a hero of the upper half. His legacy on supporting markets is secured. The price stability mandate becomes a bigger joke by the day. Arthur Burns is a good outcome in this regime.
Legacy for the wealthy? I hope that isn't his calculation. I don't think any Fed chair in history has been remembered for the way they treated one half of the economy. They are remembered for what happened.
Now, all that said, I think J. Powell will do exactly that because he is “one of them,” as you are saying. But if he cares about his legacy AT ALL to the rest of the world and to history, he won't cut.
In my view, he has the choice to be remembered as Arthur Burns but worse, who capitulated to the most partisan president in memory, or he can preserve his legacy by standing up to that. That's a different view. What do you think of that? I'm trying to learn. I only came to markets truly around 2023, so I am trying to fully understand how much of a capitulator he is. Furthermore, I know he should have kept raising rates and folded to political pressure in 2018-19, I believe. Do you think this is the same?
Also, I am not ignoring the ZIRP era commentary. I think that is embedded into the conversation we are having. Is he willing to buck that trend, which everyone knows should have been bucked 10 years ago, but bankers like arbitrage and low rates because it makes their lives easy? Everybody gets a trophy investing. I guess he cant now. too much debt.
He seems to me, like you say, someone who doesn't shake things up, who can't take any real market turmoil without acting. But I am attempting to have a very well-rounded opinion. Thanks for your time and great piece!
Our economy is based in easy monetary policy and the wealth effect. His legacy will be preserving it.
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Great write up - thanks! Agree on the cut in Dec.