A Bad Heir Day at the Fed

Paul Krugman: “So Kevin Warsh will be the next Fed chair. The silver lining to his appointment is that he shouldn’t be able to do much damage… The Fed is a republic, not a dictatorship; key decisions are made by a committee in which the chairperson has only one vote. Fed chairs can only drive policy through persuasion — and Warsh lacks the intellectual and moral credibility to be effective on that score. But God help us if we enter a crisis that requires decisive Fed leadership, the kind Fed chair Ben Bernanke showed during the financial crisis, or Jay Powell is now showing against Trump’s attacks.”

“Absent a crisis, my prediction is that the majority of Warsh’s colleagues will largely ignore him, albeit without expressing their contempt openly. Even a coalition among the Trump appointees to the Board of Governors – Warsh, Bowman and Miran – won’t be enough to overturn the responsible monetary policy stewardship of the other governors.”