Did Yellen and Powell Forget Piketty?

When it comes to the notion that Janet Yellen and Jerome Powell engaged in a tag team effort to rescue Joe Biden's flagging approval numbers late last year, I go back and forth, which is to say I both believe it and don't. As a quick reminder, Yellen and Powell turned the tide for asset prices in early November when, after cutting Treasury's borrowing estimate, Yellen tipped smaller-than-expected coupon increases in the quarterly refunding announcement while Powell took the first cautious steps

Join institutional investors, analysts and strategists from the world's largest banks: Subscribe today for as little as $7/month

View subscription options

Or try one month for FREE with a trial plan

Already have an account? log in

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

10 thoughts on “Did Yellen and Powell Forget Piketty?

  1. I think inequality has been stalling for a little while now, as wages at the bottom are doing better than at the top?

    Also – it seems clear that Biden’s chances of success got slashed by inflation. TBH, I don’t know (short of a crystal ball re. the right amount of COVID bail out to push) how he could have played his cards very differently? Maybe Matt Yglesias is right and touting record oil production levels while tongue lashing the far left would have been enough to get the normies on his side?

    My sense is enough Americans want to give authoritarianism a try (frenzied as they are by Fox News lies) and enough non-authoritarian inclined voters want to punish Biden for said inflation that the two together seem hard to defeat.

    IDK. Thoughts and prayers for the rest of the world if you guys elect Trump again?

    1. The never to be reversed jump in prices is clearly winning over “swing ” voters in many states. That compounds the votes Fred421 alludes to who are more highly driven by “the crisis on the border” and the fear of brown-skinned hoards overwhelming the nation.

      I keep hearkening back to that WSJ story about it being the #1 concern in West Virginia which has the lowest percentage of immigrants in the nation. Partly thanks to which the state is already unable to hire anywhere near enough eldercare workers. Just wait until the two Steves (Miller & Bannon) launch their mass deportation campaign next January 6th.

      Thanks to all this, Biden doesn’t seem to have a chance, especially if he stubbornly keeps Kamala Harris on the ticket.

      I’m surprised how nonchalant so many investors, including many fellow readers here, are about the coming sea change. Some seem to believe he will be held in check by the “adults in the room” as we was in the first term. But that was when they could win over the Caudillo of Mara Lago by arguing that his urges might imperil his reelection. He no longer has that concern so the few adults will soon be asked to exit through the delivery entrance.

      1. Indeed.

        I’d really be interested in articles on Trump’s national economic consequences. As an investor, the truth is I care-but-not-really if he jails his opponents or murder journalists. Before that kind of stuff materialises in institutional failure and reduced economic output, I will have had time to adjust.

        But, if day 1, he starts policies jacking up inflation to high heavens and weakening the dollar (or strengthening it?), I’d need to know.

        My understanding is that Congress will matter but, normally, the GOP will control the Senate. Leaving the House as the last check?

  2. Timing is everything. If Powell and Yellen were trying to help Biden, they should have let the Treasury sell-off continue for a few more months, staying out of the way while stocks sold off and the “wealth effect” went into reverse. Induce a recession; everyone freaks out (or starts too). No more bailing out at the first whine from a bank or a hedge fund. Bring on LTCM 2.0 if necessary (definitely a possibility given current market ‘system’). Then Biden blames Powell for pushing rates too hard, Fed drops rates through the elevator shaft, market starts to recover, inflation is gone (at least temporarily), and people from all walks of life breathe a sigh of relief as recovery begins.

    The approach outlined above is obviously not guaranteed to work, but waiting at least until January or February would have been a much wiser approach. The stakes are very high and Powell and Yellen needed top-tier market pros to help w/ their timing.

    The “economy is great” message hasn’t worked for months and could easily blow up by August/Sept making Biden and Co look like fools. Somehow other global “blow-ups” don’t matter to US voters and an economic meltdown b/n now and Nov may prove to be a relatively minor domestic “blow-up,” but it will still hurt Biden’s re-election chances.

    The situation in America is worse than grim, awful, dangerous, etc., etc. Unless those trying to protect the Republic start pushing the envelope and adopting hardnose tactics soon, America will be as different in five-ten years as the Republican Party is from what it was in 1999. It may be too late to prevent the demise of the Republic; obviously unknowable at this point. Powell and Yellen made a tactical mistake caused by a lack of vision and courage. They’re not solely responsible if Biden loses, but their “misguided” and ill-timed decisions made an authoritarian American a bit more likely.

  3. I think that a lot of the trends that are surfacing right now festered for year before they came to the surface. I think further that nobdy really understood or even understands now the multiple effects of covid- we seem as surprised by what is happening coming out of covid as we were going in….The conflict with Russia and China could be a contributor to continuing inflation as wliil reshoring for national security. The prices of food insurance and cars imo are coming down. The Trump formula is racism economic populism and isolationism. (Pat Buchanan?)The important thing to understand is that we are way too complacent about what a second trump term will look like, and how Xi Jinping will behave….

    1. I think you are correct to point out there are a large number who are too complacent. However, how can they not be complacent. They know their decision about voting only needs to be made in early November. Today all this is just annoying noise. They know they have been lied to and will continue to be lied to. However, I applaud any resistance from the powerful and well to do.

      I think too many are also underestimating the fact that a majority of voters have rejected Orange once and more will likely to reject Orange again. If there were not enough in 2020, how can there be enough voters in 2024?

      I do not think inflation is a driver like many here want to portray. I was speaking with a small business owner the other day and told him the economy is going strong. Unemployment numbers are low, how can there be a recession? He stopped to think and said that at first he thought I was wrong. However, he thought about how hard it is to find people to do work. He said yes from his personal experience, the economy is doing well. I think those conversations are best to occur 10 days before the election and the political psychologists (propaganda artists) have likely figured it out.

      I think the libertarian convention can be viewed as a microcosm of what people want from elections these days … ‘my way or the highway’. This is not a sentiment of accepting authoritarianism. It seems certain elements are willing to engage in expressive anarchy. I am not sure this sentiment includes widely held tenancies of violence, after all the privileged class has much to lose from violence.

  4. I do not think I had heard of Picketty before this article. Bought one of his books after reading some information on his theories.

  5. The numbers are very clear. 80% of Americans (the voters) own nothing and are harmed by high borrowing rates while 20% are the ones who own al the equity and loan money to Washington, so love high rates and are happy as clams. So, 80% are getting screwed and 20% love Yellen and Powell. Who wins. Trump. High equities are the enemy – who defends the impoverished 80%? Bye, bye to the American dream, American leadership, and world peace.

NEWSROOM crewneck & prints