Good afternoon,
Joe Biden did not extend his usual weekend trip to Delaware into Monday.
Instead, the President flew back on Sunday afternoon with the White House announcing this morning that Jerome Powell will be nominated for another term of the Federal Reserve Board of Governors. Governor Lael Brainard will be nominated as vice chairman.
The move brought a sigh of relief to financial markets. Despite the diminished presence of the U.S. on the world stage, Jerome Powell is the most influential person in the world of finance.
There had been speculation that the President might replace Powell with the administration using the occasion to pin the blame on the Fed chair.
But as Delawareans know, Biden is a pragmatist at heart. Not picking Powell would have shaken up financial markets and led to greater uncertainty.
None of this means that Powell and Biden are out of the woods.
(Accompanying photo. The good old days earlier in the fall when gas was $3.25 and leaves were on the trees).
Since 2017, the U.S. has been taking on a lot of debt, starting with a tax package that was not offset by spending cuts or a tax revenue bonanza.
Things worsened with Covid-19 and relief packages that were passed during both administrations.
Actions taken by the Fed led to a soaring stock market prices that gave the world more multi-billionaires but widened the wealth gap.
Inflation reared its ugly head for many reasons, including the continued effects of Covid that made long-running supply chain problems even worse. Factories are still shutting down in Asia as the virus hangs around.
The list of reasons for our predicament goes on and on, but Powell and the administration are left with few options, even if the current budget package before Congress is stripped down.
Interest rates will have to go up, and that will bring a lot of pain for potential homeowners and others.
A worse option would be simply wishing that the current run-up in prices is a temporary phenomenon, a position sometimes voiced in this administration.
Like Covid, inflation is likely to stick around. – Doug Rainey, chief content officer.
