Jay Powell just went full Volcker

Here’s the deal: The Federal Reserve made history today by approving its third straight 75 basis point rate hike. Once again, the Fed is attempting to squeeze inflation out of the economy using the strongest and broadest leverage it has — control over how much it costs businesses and people to borrow money.

One of Powell’s biggest critics, Senator Elizabeth Warren, was quick to fire off a tweet denouncing the “extreme” hike that the Fed itself expects will take unemployment to 4.4% from the current 3.7% will – which means more than 1 million jobs.

“Chair Powell just announced another extreme rate hike while forecasting higher unemployment,” Warren tweeted. “I warned that Chairman Powell’s Fed would put millions of Americans out of work — and I fear he’s already doing that.”

Powell doesn’t like to say words like “layoff” or “downsizing.” But he’s not unsympathetic to what he euphemistically calls “softening of labor market conditions.” He just thinks the short-term pain of a recession would be preferable to the longer-term pain of stuck inflation.

To prepare the labor market for continued strength, he said, we need to get inflation behind us. “I wish there was a painless way to do this.


To understand the Fed, it helps to understand Powell.

In his role as central bank governor, he does not hide his admiration for Paul Volcker, whose name is virtually synonymous with fighting inflation at all costs, even as it plunges the economy into recession. That’s exactly what Volcker’s Fed did – twice – in the early 1980s.

During testimony before Congress earlier this spring, Powell described Volcker as a hero, calling him “the greatest business official of the era.”

(Fun Fact: The 6-foot-7 Volcker was also known in DC by his nickname “Tall Paul”)

At least twice in the past month, Powell has publicly invoked the title of Volcker’s 2018 biopic, Keeping At It. In his now notoriously blunt Jackson Hole speech last month, Powell explained that “we have to hang in there until the job is done.” And again Wednesday: “We want to act aggressively now and … stay tuned until it’s done.”

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Part of the reason Volcker is remembered so favorably by Powell and others is that it took a shrewd mind and an iron stomach to a) understand the problem of rampant inflation and b) implement the painful shock therapy of rate hikes affecting millions of euros cost people their jobs. Volcker’s plan worked, but it Yes, really sucked for a while. It really was some painto borrow Powell’s euphemistic phrase.

Inflation is now at its highest level since Volcker ran the Fed, and the central bank itself is facing a credibility crisis after failing to act quickly enough to keep rising prices in check.

Credibility was also a major concern for Volcker.

“Volcker’s mantra, which he kept telling me throughout 2008-2009, was that in a crisis, the only asset you have is your credibility,” Austan Goolsbee, an economist who advised the Obama administration, wrote in 2019. shortly after Volcker died age 92.

bottom line: Powell continues to draw from the Volcker playbook, which means he’s unlikely to doubt the Fed’s target rate of 2% inflation lest the central bank’s credibility take another hit. Only time will tell if this 40+ year old playbook still holds true in an economy radically different from the one Volcker faced.

FIGURE OF THE DAY 5.2 million

Congratulations, rich people – your ranks multiply. Thanks to gains in stock markets and rising house prices, the world gained another 5.2 million millionaires in the past year, almost half of whom live in the United States. This is the largest increase in millionaire numbers for any country this century, according to Credit Suisse, which released its annual global wealth report this week.

The total number of millionaires at the end of 2021 was 62.5 million. Total global wealth rose nearly 10% to a total of $463.6 trillion at the end of last year.

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The pandemic has now pushed about 100 million people into extreme poverty, according to the World Bank, taking that global total to 711 million in 2021.


Donald Trump, already facing multiple criminal investigations from federal and state prosecutors over, among other things, his company’s balance sheets, meddling in the 2020 election and its handling of classified documents, has just been released from yet another bombastic allegation of a broad, decades-long trial hit the scam.

Here’s the deal: The New York State Attorney General filed a lawsuit against the former president, three of his children and the Trump Organization, the culmination of a three-year investigation into the family and their namesake company.

The lawsuit is more than 200 pages long and contains allegations of fraud that touched on all aspects of Trump’s business. Let’s break down some of the key points:

  • The Trump Organization deceived lenders, insurers and tax authorities by inflating the value of its properties with misleading estimates, the lawsuit alleges. It highlights “200 false and misleading reviews” of Trump’s fortune.
  • “The financial statements were grossly exaggerated, grossly inflated, objectively false and therefore fraudulent and illegal,” James said.
  • Defendants in the lawsuit include the former president; his children, Donald Trump Jr., Eric Trump and Ivanka Trump; Allen Weisselberg, former CFO of the Trump Organization; and Jeff McConney, another manager.
  • James has referred the matter to the US Attorney for the Southern District of New York and the Internal Revenue Service.
  • She is allegedly seeking $250 million in ill-gotten gains and wants to permanently bar Trump and the children named in the lawsuit from serving as directors of a New York state-registered company. It is also seeking to nullify the Trump Organization’s corporate certificate, which, if granted by a judge, could effectively force the company to cease operations in the state.
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Trump has denied any wrongdoing against him. He has previously called James a “renegade prosecutor” who he said is leading a “vengeful and self-serving fishing expedition”.

In response to the latest lawsuit, a Trump attorney reiterated his disdain for James, saying the filing “does not focus on the facts or the law – rather, it focuses solely on advancing the Attorney General’s political agenda, adding, that “absolutely no wrongdoing took place.”

Weisselberg’s attorney declined to comment.

Here is just one of the 200 examples listed in James’ lawsuit:

  • Down in the Financial District of Manhattan there is a property called 40 Wall Street known as The Trump Building.
  • Estimates of the property in 2010 and 2012 put it at $200 million and $220 million, respectively, according to the lawsuit. But Trump’s firm has repeatedly claimed the property is worth more than double the official annual accounts.
  • Trump also lied about the square footage of his triplex apartment in Trump Tower to inflate the value to over $300 million, James claims. While she claimed the apartments were more than 30,000 square feet, the actual size was less than 11,000 square feet, she said.
  • “Based on that inflated square footage, the home was valued at … $327 million. To date, no apartment in New York City has ever sold for anywhere near that amount,” James said.
There’s a lot to unpack in this suit. My CNN colleagues are totally into it.
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