Fortune Magazine article by John Greewwood and Steve Hanke
In this op-ed version of IMM Newsletter #56 Steve Hanke joins me to lay out some of the
basics of monetary analysis which the consensus of economists, and especially those at the
Fed, have systematically – and, in retrospect, foolishly – ignored over the past two or three
decades.
First, we point out that only a handful of monetarists – including ourselves – successfully
predicted the post-Covid inflation. Second, we explain some of the reasons why most
economists got their forecasts wrong. Third, we show how Fed Chair Kevin Warsh’s answers
to questions from journalists at his post-FOMC meeting press conference on September 16
were dramatically different in style from the answers that would have been given by his
predecessor, Jerome Powell. The tone of his replies was distinctly monetarist. This is why,
for example, he would not give an answer to the typically consensus question about the
natural or equilibrium rate of interest (known to economists as r*). It is not relevant to
monetarists.
At his first two press conferences in June and July Warsh made a shaky start. However, he
is now speaking with much more confidence and authority as he shapes a framework that is
starting to sound notably more coherent than that which the Fed was following previously.