Key takeaways

• Kevin Warsh’s potential as Fed Chair is met with mixed opinions due to concerns about his past performance.
• Evaluating Kevin Warsh’s track record as a Fed governor is crucial for assessing his suitability for leadership.
• The Fed’s focus on inflation during the 2008 crisis was a misjudgment, reflecting a misunderstanding of the financial system.
• Predictions about inflation and the consequences of the Fed’s balance sheet during the crisis were inaccurate.
• The Fed’s policy views appear to shift based on the political party in power, impacting monetary policy decisions.
• Data serves as a common language to facilitate discussions across different political perspectives.
• Trust in the Federal Reserve is at risk due to political pressures and perceptions of bias.
• The partisan nature of the Fed’s leadership could undermine its effectiveness in a crisis.
• The Fed’s ability to act in a crisis relies on bipartisan support from Congress and the White House.
• Ordinary treasury QE is not significantly impacting the economy as many believe, challenging common perceptions.
• Political dynamics influence the Federal Reserve’s decision-making processes, affecting economic stability.
• The effectiveness of the Fed’s policies during and after the financial crisis is crucial for understanding lessons learned.

Guest intro

Skanda Amarnath is the co-founder and Executive Director of Employ America, a nonpartisan macroeconomic policy research organization focused on full employment and Federal Reserve policy. He previously served as Vice President at MKP Capital Management as a market economist and strategist, and as an Analyst in the Capital Markets function of the Research Group at the Federal Reserve Bank of New York.

Mixed opinions on Kevin Warsh’s candidacy

• There are mixed opinions on Kevin Warsh’s potential as Fed Chair, reflecting broader anxieties about his past performance.

  — Skanda Amarnath

• The context of Kevin Warsh’s previous tenure at the Fed is crucial for understanding differing perspectives on his qualifications.

• I myself am much more sympathetic to what our friend Neil has pointed out… there are a few different anxieties.

  — Skanda Amarnath

• Evaluating a Fed governor’s track record is essential for assessing their suitability for leadership roles.

• We have like a track record… we don’t have to like rely on secondhand validation.

  — Skanda Amarnath

• Direct experience is important in evaluating candidates for critical economic positions.
• The nuanced views surrounding Warsh’s candidacy indicate potential concerns that merit further discussion.
• Understanding the significance of a Fed governor’s track record is key to assessing leadership potential.

Misplaced focus during the 2008 crisis

• The Fed’s focus on inflation during the 2008 crisis was misplaced and reflected a misunderstanding of the financial system.

  — Skanda Amarnath

• The Fed’s approach during a critical period is critiqued for significant misjudgment.

• This is someone clearly who had his eye on I’d say the wrong ball at that time… he came up with a lot of reasons why he thought inflation was going to explode.

  — Skanda Amarnath

• Understanding the role of the Fed during the 2008 financial crisis is crucial for current and future monetary policy discussions.
• The predictions about inflation and the consequences of the Fed’s balance sheet were not accurate.

• Those predictions weren’t really true… he kind of missed the whole financial crisis in a way.

  — Skanda Amarnath

• This claim addresses the inaccuracy of the Fed’s predictions, which is crucial for understanding the effectiveness of its policies.
• Lessons learned from the crisis are vital for future economic strategies.

Political dynamics influencing monetary policy

• The Fed’s policy views seem to shift based on the political party in power.

  — Skanda Amarnath

• The intersection of politics and monetary policy suggests a pattern that could impact future economic strategies.

• There’s a tendency if you look through his track record of basically worrying about inflation and worrying about sort of fiscal excesses during periods when it’s a democrat that’s in the white house.

  — Skanda Amarnath

• Understanding the political dynamics influencing monetary policy decisions is crucial for economic stability.
• The Fed’s policy shifts based on political affiliations, impacting its decision-making processes.

• It tends to flip towards deregulation and productivity growth that are going to be disinflationary when it’s a republican that’s in the white house.

  — Skanda Amarnath

• This insight highlights a significant observation about the intersection of politics and monetary policy.
• Political dynamics play a role in the Federal Reserve’s approach to economic governance.

The role of data in policy discussions

• Data serves as a common language to facilitate discussions across different political perspectives.

  — Skanda Amarnath

• The importance of data in bridging political divides is crucial for effective policy discussions.

• It’s a useful language for being able to get people from different policy preferences different political orientations to get on something of the same page.

  — Skanda Amarnath

• Understanding the role of data in macroeconomic discussions is essential for policy-making.
• Data provides a foundation for discussions across varying political orientations.
• The use of data helps align different policy preferences for effective economic strategies.
• Data-driven discussions are key to overcoming political biases in policy-making.
• The impact of data on policy discussions underscores its significance in economic governance.

Trust and the Federal Reserve’s credibility

• Trust in the Federal Reserve is at risk due to political pressures and perceptions of bias.

  — Skanda Amarnath

• Political interference poses challenges to the Fed’s legitimacy and credibility.

• There’s a lot of risk of eroding trust in the fed when trump has been saying that he wants his guy in who’s gonna do what he wants.

  — Skanda Amarnath

• The current political climate influences the Federal Reserve’s credibility and effectiveness.
• Maintaining trust in the Fed is crucial for its role in economic stability.
• Political pressures can undermine the Federal Reserve’s independence and authority.
• The perception of bias in the Fed’s decision-making processes affects its credibility.
• Ensuring the Fed’s impartiality is vital for maintaining public trust.

Partisan leadership and its impact on the Fed

• The partisan nature of the Fed’s leadership could undermine its effectiveness in a crisis.

  — Skanda Amarnath

• Political affiliations may affect the Federal Reserve’s ability to respond to economic crises.

• What I wonder about that is if we run into any sort of situation where you’re gonna need the fed to kind of put out a fire.

  — Skanda Amarnath

• The intersection of politics and economic stability raises concerns about the Fed’s effectiveness.
• Partisan leadership poses risks to the Federal Reserve’s crisis management capabilities.

• How do you like muster that together when like this person has been kind of been pretty consistently partisan and ideological.

  — Skanda Amarnath

• Political affiliations can impact the Fed’s decision-making processes during emergencies.
• Ensuring bipartisan support is crucial for the Fed’s effectiveness in crisis situations.

The necessity of bipartisan support for the Fed

• The Fed’s ability to act in a crisis relies on bipartisan support from Congress and the White House.

  — Skanda Amarnath

• Political cooperation is essential for the Federal Reserve’s crisis intervention strategies.

• The fed steps in in the crisis when they get the backing from both congress and the white house; that may not exist.

  — Skanda Amarnath

• Understanding the importance of political consensus is key to the Fed’s operational dynamics.
• Bipartisan support ensures the Federal Reserve’s effectiveness during economic emergencies.
• The necessity of political cooperation underscores the Fed’s reliance on government backing.
• The Federal Reserve’s crisis management capabilities depend on bipartisan political support.
• Ensuring political consensus is vital for the Fed’s role in economic stability.

Reevaluating the impact of quantitative easing

• Ordinary treasury QE is not significantly impacting the economy as many believe.

  — Skanda Amarnath

• The effectiveness of QE is challenged, providing a critical perspective from an expert.

• If you ask me ordinary vanilla treasury qe is not really doing much it’s mostly an asset swap of two risk free assets.

  — Skanda Amarnath

• Understanding the mechanics of quantitative easing is crucial for evaluating its economic effects.
• This insight challenges common perceptions about the impact of QE on the economy.
• The role of QE in economic strategies is reevaluated based on expert analysis.
• The perceived effects of QE may not align with its actual impact on the economy.
• Reevaluating QE’s impact is important for shaping future monetary policy decisions.