Former Fed Governor Kevin Warsh, one of the most outspoken and critical members of the Fed’s extended family by far, lashed out at the prevailing groupthink that has permeated the Federal Reserve in a speech delivered moments ago at the Hoover Fed Conference titled “The Battle of Ideas”, in which among other things he explained that the Fed has no real strategy on policy normalization, asked “what could possibly go wrong” and, unlike all his former colleagues, provided an honest answer.
Here are some select excerpts from his speech:
According to popular lore, the Valley finds itself in the middle of long epoch of prosperity. And we are assured this is a sustainable, durable equilibrium. What could possibly go wrong?
That is the central question central bankers should be asking.
(Tail risks run in both directions. A subject for another day is ‘what could possibly go right’? The more material constraint on further economic expansion is on the productive side of the economy. If a pro-growth reform agenda were adopted across a range of macroeconomic policies, higher labor and capital supply into the real economy would cause economic growth to track substantially above Fed forecasts.)
This post was published at Zero Hedge on May 5, 2017.
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