Writers Room
Have you heard the meme “Money printer go brrr”?
Meet the man with the keys to the printing room.
Some people are born legends and other become them. Jerome Powell’s story is still being written today but has become one of controversy and mystique. Who is this man with the money printer and how have his actions affected the stock and Crypto markets?
Contents
#1 Early Life
When Jerome Powell was given the role to lead the Federal Reserve in 2017, people were skeptical. His background was a bit unusual for the job.
He had no formal economic training and a career path that spanned law to investment banking. His predecessors at the Federal Reserve held master degrees in Finance. This man lacked the economic forecasting ability of Greenspan, the monetary policy of Ben Bernanke, and the labor market knowledge that Yellen had.
One reason for Jerome Powell's appointment to fed was due to his ability to make decisions under unusual circumstances. Previous co-workers touted him as a 'problem solver' and someone who could see solutions no one else could.
In 2011, when Republicans made threats to default on their debt, Powell strolled the manicured gardens of Capitol Hill with a binder, calmly urging lawmakers to consider the risks of a default on the economy.
"I never saw him lose his temper" said Richard Fisher, former president of the Federal Reserve Bank of Dallas. "Jay doesn't promote himself like so many do in Washington. He likes to do the unglamorous jobs."
This humble man had traded a lofty job in finance to work for $1 at one of Washington's quiet think tanks. He paced the halls of Congress urging for calmness and restraint.
Despite his vast wealth, friends of Powell described him as "annoyingly normal". He ejoys golf and playing guitar in his free time. One of his quirks is the odd abiltiy to repeat people's sentences backwards to them. One colleague said it's a reminder of his smarts and how closely he listens.
#2 Trump Appoints Jerome Powell as Fed Chairman
When Trump won the presidency in the 2016 election, he opted to replace Janet Yellen with the mild-mannered Powell. Was it because of the vast wealth he built at the Carlyle Group? When Powell was elected into office, he became the richest Fed Chairman since 1934.
When Powell first showed up for the job, they didn't know what to do with him. According to Grumet, he was given a “junky little office in the back overlooking the alley.” But Powell never complained. Instead, he listened carefully to what was going on and built up binders of information.
“In the three years we worked together, there was only one thing he ever asked for: Larger binders.” said Grumet.
“When he showed up at the Fed, he basically did not know much about macroeconomics or monetary policy,” says Seth Carpenter, chief U.S. economist at UBS. “He made a conscious decision to spend a lot of time with staff and colleagues to learn as deeply and completely as possible.”
Although Trump appointed Powell to the position of Fed Chairman, the president and Jerome Powell have had a tumultuous history.
#3 The Controversy of Carlyle Group
From 1997 to 2005, Jerome Powell was a partner at the Carlyle Group, a group shrouded by controversy and secrecy.
For example, Michael Moore made a documentary 'Fahrenheight 9/11' that examined the relationship between the Carlyle Group and its ownership of defense contractor United Defense.
In The World According to Bush, William Karel interviewed Frank Carlucci to discuss the presence of Shafiq bin Laden, Osama bin Laden's estranged brother, at Carlyle's annual investor conference while the September 11 attacks were occurring.
It's unclear what Jerome Powell's relationship with the Carlyle Group was, but the Carlyle Group's influence on Washington policy makers as well as its role in the 2008 financial crisis and the fact that Shafiq Bin Ladin, a member of the Bin Ladin Family, had been a 'guest of honor' and invited to participate in Carlyle's managed funds was too strange for us to ignore.
It's rumored that Jerome Powell's wealth mainly came from his time with the Carlyle Group.
#4 A Bull Market for Wall Street, A bear market for humans
Jerome Powell's true first test came when the world economy pulled its brakes to deal with the Covid-19 pandemic.
As the economy came to a screeching halt and stock prices began a steep decline, Jerome Powell would soon take steps that would 'Change the course of the fed forever'. Through a combination of Quantitative Easing and lowering interest rates, Jerome Powell conditioned the market to massive amounts of stimulus never before seen.
As the Federal Reserve continued to apply high levels of monetary stimulus to further raise asset prices and support growth, some observers perceived a disconnect between asset prices and the economy. A bubble was beginning to form...
Powell simply argued that the Fed's dual mandate of stable prices outweighed the concern over asset inflation and wealth inequality. As of November 2021, pressures on Jerome Powell to slow the rate of Quantitative Easing and mounted.
Inflation hit 6.8%, the highest in 40 years. Bloomberg news called Jerome Powell 'Wall Street's Head of State' due to how profitable his actions were for Wall Street.
2020 may have been a bull market for Wall Street, but it will be remembered as a bear market for humans.
Jerome Powell's effect on financial markets drew similarity to the infamous 'Greenspan Put' that led to the 2001 Tech Bubble.
#5 The No-Lose Casino
The Washington post said that Powell had "adopted a strategy that works like a one-way ratchet, providing a floor for stock and bond prices but never a ceiling" and that any attempt to taper "will trigger a sharp sell-off by investors who have become addicted to monetary stimulus"
In June 2020, Jim Grant called Powell's Wall Street Dr. Feelgood.
In January 2021, Edward Luce of the Financial Times warned that the Fed's use of asset purchases could lead to economic instability saying "The majority of people are suffering amid a Great Gatsby-style boom at the top".
Cryptocurrencies also saw dramatic increases in price during 2020, leading Powell to win the 2020 Forbes Person Of The Year In Crypto.
"You can't lose in that market," said Jim Cramer, adding "it's like a slot machine" that always pays out. "I've not seen this in my career"
"High up on his list, and sooner rather than later, will be dealing with the consequences of the biggest financial bubble in U.S. history. Why the biggest? Because it encompasses not just stocks but pretty much every other financial asset too. And for that, you may thank the Federal Reserve." said Richard Cookson to Bloomberg.
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No one knows exactly when the music will stop and who will be left standing after the taper. Jerome Powell is determined to not take away Wall Street's punch bowl just yet, vowing that when the taper begins, it will be slow and gradual.
The Federal Reserve has had a long history of intervention in U.S financial markets. Proponents of Bitcoin actually argue that this is the reason we need cryptocurrency: To stop the never-ending inflation of asset prices and put a stop to the madness.
Are we in a bubble? Do you think that Jerome Powell knows what he's doing, or are we leading our economy into an eventual crash? Let us know.
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