Kevin Warsh has started to shift the behavior of the Federal Reserve. From limiting forward guidance to a proposed reduction in the frequency of meetings.
I sat down with Jack Marx, research assistant at Decode Econ, to discuss this topic. We have divergent views on whether this is good or bad for the economy. We work through our views, and we hope you can chime in with yours.
Thanks Jack
We also say goodbye to Jack. This is his last week at Decode Econ. He starts at Chase Law School this fall. I am grateful for all he has done to help this platform and podcast grow.
We will be onboarding the Fall 2026 team here soon. Stay tuned for the announcement.
Check out the YouTube conversation or find us on the podcast platform of your choice.
It seems to me that Jack is taking what I might call a "Micro" view, whereas you (Abdullah) are taking a kind of "Macro" view. Jack repeats several times that he likes competition, but in the concentrated markets we currently experience (and frankly have always experienced in finance), competition is limited. I am calling this "Macro", because I am suggesting that we need to see the overall picture of how this industry operates, not just the fact that even in an oligopoly, which is surely the kind of market that the finance industry is, there is competitive pressure.
It is useful to remember that the Federal Reserve was created in 1913 because J.P. Morgan, ONE SINGLE BANKER, had to bail out the United States government TWICE: first after the Panic of 1893 by providing gold in 1895, and second a massive bailout by a consortium of bankers (for which read "cartel") led by J.P. Morgan. This is not, and never has been, "perfect competition" -- defined as a market which has a large number of small companies, none of which can affect pricing. It hurts my ears when we talk about "markets" without defining what kind of markets they are -- it makes a huge difference. Please suggest to Jack gently that he take a course in economic history, and that he watch closely how often "competition" drove economic regulation and oversight, and how often cartelization/oligopolization did so. The myth that "competition" is what exists in contrast to Fed or other independent oversight is heavily financed and promoted by... you guessed it -- the finance industry.
Second (in the context of an industry which does NOT exhibit the abstract and inapplicable "perfect competition" model): Bernanke used forward guidance to help ensure that companies were more likely to follow Fed versions of how the economy was doing and how they would regulate interest rates to manage it. Critically, this was fully dependent on the finance industry believing that the Fed was basing its assessments on 1. better information than anyone else, and 2. better and more objective analysis than anyone else, that they were 3. operating in the best interest of the overall economy, which is in turn in the best interest of the finance industry IN THE LONG RUN (which I define as being over the business cycle), and that 4. they were operating completely independently of political influence. NONE of this was possible unless the Fed made all its sources of information and how heavily they were weighted publicly available, and clearly and publicly stated its methods and objectives -- and that they rigorously FOLLOWED THEIR OWN ADVICE. The finance industry had a great incentive to carefully dissect this advice and criticize any missteps or points that were unclear -- and rightly so -- this was how the whole system was kept honest.
In contrast, the move away from revealing information, far from offering a mythical "competitive" market input to which it had previously not had access, hands power to an oligopoly of finance firms that would then influence US policy to favor the interest of the few largest shareholders in their industry to the detriment of the rest of the economy. As happened in the late 19th/early 20th centuries.