Two-Armed Economists Need Not Apply

The ghost of Harry Truman is surely still wandering about the financial netherworld looking for the proverbial one-armed economist. He famously called for the latter after enduring too much “on the one hand” versus “on the other hand” advice from government economists.

Yet 75-years later Jerome Powell reminds us once again that the two-armed modality is the standard practice among economic policy-makers attempting to usurp the functions of the free market:

 “Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment,” said Jerome Powell, in a speech to the Economic Club of New York……

“Doing too much could also do unnecessary harm to the economy,” continued the Fed Chairman, his audience looking for even the slightest signal as to where he’s headed next.

Alas, how about if the Fed chair and his merry band of 12 definitely-not-geniuses on the FOMC did nothing at all and let the free market find the right answer as to market-clearing interest rates and asset prices?

Needless to say, that’s unthinkable in either Washington or on Wall Street because both ends of the Acela Corridor thrive off the Fed’s excesses. To wit, on the way up Wall Street rides the bubbles to fantastic unearned riches, while on the way down Washington borrows and spends trillions to “rescue” main street and counts on the Fed to monetize the resulting flood of new UST bills, notes and bonds.

These disruptive swings are supposedly the inexorable way of the economic world—perhaps only to be ended when the FOMC finally gets it just right as between too much and too little at the fiat money printing presses. That is to say, “boom and bust” is purportedly the price we pay to have a central bank that perks up what would otherwise be the dismal performance of free market capitalism left to its own devices.