Joe Biden made his intentions pretty clear during his campaign in 2020 when in an interview on monetary policy, he said that the famous monetarist Milton Friedman “isn’t running the show anymore”. And, given the signals President Biden is sending with his appointments to the Federal Reserve Board and other financial management agencies, the job of running the show has in substance shifted to Sen. Elizabeth Warren and her friends in the Consumer Financial Protection Bureau, who clearly want to have the executive branch of the government heavily involved with the allocation of capital. I have previously expressed my thoughts on the mission creep into social issues and climate change (see The Texas Pilgrim of January and June 2021) through the regulatory powers of the Fed, and now, with the resignation of the FDIC Chairman, we have a Democrat majority FDIC Board to complement the newly appointed Federal Reserve Board Vice Chairman in charge of bank regulation. This invites a politization of bank supervision that is destined to have far-reaching negative implications.
And all of this shuffling of monetary policy leadership and mission creep is taking place when the November inflation rate of 6.8% reached its highest level since 1982, when President Ronald Reagan and Federal Reserve Chairman Paul Volcker went on the attack. The differences are many, but primarily Volcker knew that inflation is a function of the growth of the money supply, as Friedman said, and Reagan knew that fiscal policy was all about the supply side. Neither current Fed Chairman Jerome Powell nor Biden seem to have a clue about it and Secretary of the Treasury Janet Yellen is all about demand side policy and spending stimulus. Good luck.