I’m just honored that I generated over a thousand likes!
I’m back, baby! Just in time for Jay$’s final FOMC meeting as Fed Chair. He and I had a nice sit down to discuss his time as Fed Chair, his relationship with the president, and what’s next. Portions have been edited for brevity and to make me look smart.
Between Two JPs
JP: “Most Fed Chairs are talented, rich, old, white Ivy Leaguers. How did you do it without talent?”
Jay$: “Probably the same way you write a weekly newsletter without talent."
JP: “Let me stop you right there – it can’t be weekly if I skip some weeks! In the least surprising news of the week, the DoJ dropped its investigation into your testimony about the Eccles renovations. Are you relieved?”
Jay$: “I have a law degree and an IQ over 90, so I wasn’t worried to begin with. I am, however, relieved that my sweet Tommy Bahama gear will still get used this summer.”
JP: “Your final meeting as Fed Chair is just days away. How do you feel about that?”
Jay$: “This will be my 67th me…”
JP: “SIX SEVEN!!!”
Jay$: “……..”
Jay$: “Like I was saying, this will be my 67th meeting as Fed Chair. When I became Fed Chair, we were coming out of 8 years of ZIRP, no one had heard of covid, we actively hoped inflation would exceed 2%, we hadn’t yet dropped $3T on the economy from a helicopter, and the Fed’s balance sheet was ‘just’ $4.5T…it’s time.”
JP: “You were sworn in less than 12 hours after the Eagles won their first Super Bowl. How hungover were you?”
Jay$: “Fun fact – during my time as Fed Chair, the Cowboys have as many playoff wins as the Eagles have Super Bowl titles.”
JP: “You hiked at your first meeting, but Trump didn’t attack you the way he does now. Why do you think that is?”
Jay$: “Ahh…the good ole days. First, he had just appointed me just a few weeks before. Second, rates were at 1.5%. Most importantly, his own policies over the last year are the main reason we aren’t cutting right now. I think he views our neutral stance as being at war with his policies.”
JP: “Trump has also called you a genius…(checks notes)…oops, sorry, that was Putin. Trump has also called you a clown, a loser, and a jerk.”
Jay$: “I’ve called him way worse, I just don’t do it in tweets.”
JP: “Now that you’re outta the game, what would you say to him?”
Jay$: “Setting aside tariffs and Iran, it’s a testament to his policies that rates don’t need to be cut. We entered this year with significant fiscal tailwinds. If he would just stop shooting us in the foot, the economy is in a great place. Unemployment is historically low and very stable. Stocks are at all-time highs. AI is creating all sorts of exciting new opportunities. Rates are just one piece of the puzzle, and I would be spending more energy on messaging about what’s working than whining about the Fed not cutting rates.”
JP: “How’s bragging camp going?”
Jay$: “Listen, I am the first to admit we were slow to hike rates. But we were coming out of a global pandemic and we wanted to err on the side of protecting American jobs. Once we realized the situation, we hiked decisively and raised rates 5% in a year. It’s been almost three years since our last hike and we haven’t had a recession. The labor market is hanging in there despite the repeated calls for its demise from the likes of you. If I’m ‘Too Late’ Jerome, are you ‘Premature’ JP?”
JP: “Wait one second…”
Jay$: “Were we perfect? No, but I do think we deserve some credit for navigating a pandemic, epic snapback, and then guiding a vastly overheated economy into a soft landing.”
JP: “I went out to dinner last night and ordered a $24 sandwich. Since inflation is transitory, how long before it’s back down to $15?”
Jay$: “That sounds like a Thursday problem…”
JP: “Volcker. Greenspan. Bernanke. Yellen. Powell.”
Jay$: “Yep, that’s the sequence, with Warsh on deck.”
JP: “Oh, sorry, I was just naming my favorite Fed Chairs in order.”
Jay$: “….”
JP: “Let’s talk Fed balance sheet. What in the world were you guys thinking running that up to $9T?!”
Jay$: “I think it began with the GFC. As lender of last resort, decisive Fed action was needed to avoid a financial system implosion. In the subsequent years, we transitioned from ‘last resort’ to ‘first resort’. But because it happened gradually, we almost didn’t notice until it was too late. Congress refused to do its part, and subsequent actions too often fell onto our shoulders. This pattern repeated itself during the pandemic. Anytime the economy hiccups, everyone wants the Fed to step in. If I have one hope for Kevin, it’s that he can move the Fed back towards its intended last resort role.”
Fern: “This is my show, when do I get to talk?”
JP: “Wednesday’s the big day. Last day as Fed Chair, Warsh confirmation, and your announcement about whether you will remain on the Board. Here’s your chance to tell our dozens of readers – will you remain on the Board?”
Jay$: “It has been a tremendous honor…”
JP: “Yeah I don’t care about any of that. I know you won’t tip your hand. So what will your legacy be?”
Jay$: “I think I’ll be known as Jay Soft Landing Powell. Hopefully Warsh doesn’t botch it.”
JP: “Speaking of which, last week before Congress, Warsh said, ‘The Fed must stay in its lane. Fed independence is placed at greatest risk when it strays into fiscal and social policies where it has neither authority nor expertise.’ Did you interpret that as an attack on you?”
Jay$: “During Warsh’s first term on the Board, his nickname was Convenient Kevin. He’ll say whatever it takes to get more power. This guy has spent his life talking about inflation ghosts and suddenly wants to cut rates a point? I’ll be interested to see what his real views are once Trump is a lame duck.”
JP: “Where is Fed Funds in a year?”
Jay$: “Unchanged, or down a little bit. I think we could ease off the brakes with one or two more cuts once the oil shocks have subsided. But overall the economy is in a good spot. Neutral means rates aren’t discouraging or encouraging growth…it feels like we are mostly there. Let markets do their thing.”
JP: “Can any JP without a PhD in Economics become Fed Chair? Or only those with $50mm in the bank?”
Jay$: “I’ve trademarked The Real JP™ and after today you’ll have to pay me a fat million dollar fee to speak with you again. Savor the flavor. I won’t be a public servant much longer and I won’t have to respond to these sorts of interview requests.”
JP: “Last question – will you wear a purple tie on Wednesday?”
Jay$: “I won’t tell anyone ahead of time what I’m doing, but there will be signs…”
The Real JP™
It’s a little weird to think of a Fed without Powell. When he became Chair, all five of our kids were still in the house with us, and now our youngest is about to graduate high school. Pensford was like 5 people. And he really did assume the role the day after the Eagles’ Super Bowl win. It’s going to be hard to come up with a nickname for Warsh as cool as Jay$.
Actual screenshot of the intro to the newsletter on the day Powell was sworn in. Time flies when you’re having fun (pay no mind to the Wentz comment).
Thanks for a great eight years, Jay$. You weren’t perfect, but you were perfect for my newsletter.