America meets Fed Chair Jay Powell: Morning Brief
Friday, March 27, 2020
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Powell speaks to Main St. during a time when they’d normally be getting ready for work
Federal Reserve Chair Jerome Powell spoke to America on Thursday, and he didn’t sugarcoat what everyone agrees is a major economic crisis tied to an unprecedented public health crisis.
“We may well be in a recession,” Powell said bluntly to Today Show co-host Savannah Guthrie.
His appearance occurred on NBC, a free broadcast channel, at around 7:05 a.m. ET, a time when many Americans would under normal circumstances be preparing to head into work.
But in recent weeks, many Americans haven’t been heading into work. Unless you work in an “essential” business, you’re probably working from home, furloughed, or even unemployed.
For those listening, Powell explained how the economic woes challenging the world today could prove short-lived.
“I would point to the difference between this and a normal recession,” he added. “There’s nothing fundamentally wrong with our economy. Quite the contrary. The economy performed very well right through February.”
In other words, the economy isn’t collapsing because of excesses and imbalances that were doomed to crack.
“This is a situation where people are being asked to step back from economic activity, close their businesses, stay home from work,” he said.
That sounds about right, right? It’s one thing when your shop is empty because people are broke. It’s another thing when your customers are being asked to stay at home.
Building a bridge until the virus is under control
Guthrie asked Powell about the Fed’s efforts to bolster the economy, and the essence of his answers was captured in one statement he made: “We’re not going to run out of ammunition.“
One word, however, he repeated was “confidence.” Confidence is what gets businesses and consumers spending again. It’s something that’s lacking today.
How do we regain confidence?
“At a certain point, we will get the spread of the virus under control and at that time confidence will return,” he said. “Businesses will open again. People will come back to work.”
“Wise words from Jay Powell,” tweeted NYU economics professor Nouriel Roubini. (That’s quite an endorsement from an academic informally known as Dr. Doom, who by the way has been warning of a “Greater Depression.”)
You don’t get the economy humming again by forcing it to open at some arbitrary date (like Easter). You address the reason why the economy shuttered in the first place, and then let the participants in that economy do their thing.
Until that virus is under control, the Fed in collaboration with other policy makers is working to keep the economy from falling apart.
“We’re trying to create a bridge from our very strong economy to another place of economic strength,” Powell said.
Whether you thought he did a good job or not, Powell’s appearance was one for the history books. People are already drawing parallels to then Fed Chair Ben Bernanke’s appearance on CBS’s 60 Minutes, which by the way was taped just days after the stock market bottomed in March 2009.
By Sam Ro, managing editor. Follow him at @SamRo
What to watch today
Economy
8:30 a.m. ET: Personal Income, February (0.4% expected, 0.6% in January)
8:30 a.m. ET: Personal Spending, February (0.2% expected, 0.2% in January)
10 a.m. ET: University of Michigan Sentiment, March final (90.0 expected, 95.9 prior)
Top News
US House to debate coronavirus aid bill today [Reuters]
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