Joe Biden and Jay Powell

Self-interest has made Joe Biden and Jay Powell best buds. Joe has agreed to reappoint Jay. Jay, in turn, has reassured Joe that America can (and will!) achieve low inflation and ever-higher equity prices by November 2022. – The Lonely Realist

Have you imagined the conversation that President Biden must have had with Jerome Powell during the process leading to Jay’s reappointment as Federal Reserve Chair? Whatever economic rationales media outlets have credited to Chairman Powell, all that matters to President Biden is that Chairman Powell delivers good economic news by Election Day next November. TLR, having a vivid imagination, envisions that a recent meeting between Joe and Jay might have gone something like this:

President Biden: Hello Chairman Powell. So great to finally meet you! How’s the family? I have every confidence that they’re flourishing under my health and economic initiatives. Am I right?

Chairman Powell: You are sooo right, Mr. President! And I do mean, Mr. President! No doubts here, hahaha. But please call me, Jay, Mr. President. That’s what all my friends, Democrats and Republicans, call me. You look terrific, Mr. President! So healthy, so youthful.

President Biden: Why thank you, Jay. Although I’m 79, it’s great to hear you say that I look much younger. The fact is I’m feeling really fit. Working hard, you know, trying to return the country to health – physical health, mental health, and economic health. That’s why we’re here today, Jay, to talk about how you and I can work together to restore the country’s economic health.

Those who I work closely with don’t call me Mr. President, Jay. They call me Joe. That’s also what former Republicans – former Republicans just like you – call me. Trump Republicans refer to me as Brandon, hahaha.

Chairman Powell: Thank you, Mr. President … Joe. I’ve been a keen observer of the work you’ve been doing these past 10 months and, to your credit, the country’s getting back on its economic feet. My job as Federal Reserve Chair is to further that trend in every possible way.

President Biden: The economy, Jay. That’s exactly what we need to talk about. The country’s future and my future depend on rebuilding a healthy American economy. A healthy economy requires outstanding performance by the Federal Reserve, which means that the burden falls on me to select the right Fed Chair to make that happen …, as well as appointments to the three additional open seats on the Fed Board. You are my first choice as Chair, Jay. The Fed Chair, whether you or Lael Brainard – to be candid, Jay, she’s the other choice –, has to pursue policies that individual Americans can readily appreciate. Nancy and Chuck can’t deliver on my legislative agenda without a Congressional majority. Retaining control of Congress in next November’s mid-term elections requires a healthy and robust American economy. The burden for achieving that falls on the Fed.

Chairman Powell (smiling): I understand that, Joe.

President Biden: You did a fine job for former President Trump – FPT –, truly a fine job. You kept up the money-printing, and did so because of the intense pressure FPT placed on you. The resulting three interest-rate cuts and re-expansion of the Fed’s balance sheet in 2019 added fuel to the expansion fire, stimulus that, candidly, worked out well for America. It kept the economy and jobs growing and inflated equity prices. FPT must have been overjoyed with how you navigated those difficult times, especially after COVID-19 hit …, though he never gave you credit for the country’s economic performance. Well, Jay, I will give you the credit. You’ve poured money into every corner of the American economy, so much so that it’s overflowed into every asset class, every commodity, and every service business. The result is that you successfully steered America through one of the worst contractions in U.S. history. However, all that money-printing fired-up inflation, much more so after being supplemented by FPT’s tariff barriers – they contorted supply chains –, FPT’s squeezing of the immigrant labor supply, FPT’s lavish 2017 tax cuts, and the prior Administration’s multiple rounds of COVID stimulus. What America now needs is a strong, focused Fed to restore the nation’s economic balance to its historically high-growth and low-inflation footing. You’ve been repeating over-and-over that “inflation is transitory.” That’s the positive message that America requires! If I reappoint you, that’s the reality that you need to make happen!

Frankly, Jay, I love that positivity. It’s good for America. It’s also good for the stock market … and we both know how important the stock market is for America’s voters.

Wait. What? [Thanks Antony.] Oh, that reference to voters was an inadvertent stutter, hahaha. Fox News says that I don’t have a stutter, Jay. It claims that I’m a forgetful old fool, that I don’t have a clue about how to manage the economy. That gets my blood boiling. You and I can show them a thing or two, Jay, can’t we? Or three. Or four. Or five. In any event, elections should play only a limited role in our economic decision-making.

Chairman Powell: On the contrary, Joe. Elections play an essential role. Public perception drives individuals’ behavior and potential political fallout can weigh on economic performance. Expectations have to be carefully managed. My positive statements are a reflection of that …, and I can assure you that they will continue to be …, and that the Fed will make them a reality.

President Biden: I’m happy, in fact overjoyed, to hear you say that, Jay. Um, now where were we?

Chairman Powell: You were explaining about how beneficial my positivity is for America’s economic health.

President Biden: Oh, yes. That’s right. I was applauding your consistency, Jay. I was talking about your comforting statements, yes, the ones about transitory inflation. Those reassurances have had a positive impact on job creation and growth. Those are a good things! You’ve added your pledge that the Fed will move cautiously towards policy normalization, beginning the tapering process – if there is one – “in a slow fashion” and yet definitively nipping inflation in the bud. I like that! You’re pursuing a plan that will not adversely affect America’s labor or stock markets. I’m depending on that, Jay! The policies that the Fed would pursue under your leadership need to create American jobs and continue raising equity prices exactly as they did for FPT. Can I rely on you to make that all happen, Jay?

Chairman Powell: I will do my best, Mr. President. Those indeed are the Federal Reserve’s mandate, to maximize employment and ensure stable prices through policies that moderate long-term interest rates. Achieving that mandate is a difficult task, Joe. Economics is only an art, the art of the possible.

President Biden: Hahaha. How Bismarckian of you to put it that way, Jay.

Let me say this even more clearly, then. What I need from you, Jay, and what America needs, is results! And what that means is that the American economy must shrug off inflation and continue to add jobs, grow and achieve higher stock market prices, and do so by the third quarter of 2022 … and doing that will depend on you!

Oh my, look who’s unexpectedly dropped by, Jay! It’s Lael Brainard. What a coincidence. [You know that she’s a fave of the Progressive wing of my Party, promising more-and-more money-printing to spur employment.]

So good to see you, Lael. You of course know Jay. After all, you two serve together on the Fed Board, hahaha. Jay and I were just talking about inflation and growth and the reasons why reappointing Jay as Fed Chair would be good for workers and good for investors. I’m happy to say that Jay has assured me that the current bout of inflation will be transitory and that the Fed will do whatever it takes to tame it without damaging job creation or stock market prices. On that basis, I’ve decided to reappoint him as Fed Chair. Significantly, I will appoint you as the Fed’s Vice-Chair. The combination of you and Jay creates a powerful duo …, with you as a backstop should anything go wrong, hahaha.

Just kidding, Jay.

Jay, remember in 2019 when FPT threatened to demote or fire you? Experts at the time said that a President can’t demote or fire the Fed Chair before his term ends. FPT disagreed, saying that of course “I have the right to fire him.” Remember that? Hahaha. When I mentioned this to Attorney General Garland, he said he’d look into it, but I told him “Never mind. I’m sure I can rely on Jay!” Hahaha.

Anyway, Jay, Lael would be your perfect successor as Fed Chair when your term ends in 2025 …, as long as I’m re-elected President in 2024. That requires that the two of you (plus my three impending Fed appointees) succeed in taming inflation, maintaining job growth, and keeping the stock market moving ever skyward. I’m sure the Fed can do all that … and more. Am I right … or am I right … or am I right? If I am, there are other plum appointments that you might covet, Jay. Secretary of the Treasury perhaps? Maybe a seat on the Supreme Court? Success also would place you in the perfect position to run for higher office….

[Ed. Note: This past week, Chairman Powell welcomed his reappointment as Fed Chair and Lael Brainard graciously accepted appointment as Fed Vice-Chair. President Biden emphasized that his forthcoming appointments to the three current vacancies at the Fed “will bring new perspectives and voices.” What this might mean for America was most recently discussed by TLR  here.]

More Winter Movie Suggestions:

All That Jazz (Bob Fosse choreography!)
Damn Yankees (dated, but with Bob Fosse choreography!)
In the Heat of the Night
The Wizard of Oz
The General
Rear Window
Apollo 13

Finally (from a good friend)

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