History of banking crises holds a warning for Jay Powell

Bloomberg/Niall Ferguson/3-19-2023

“With inflationary pressures still discernible, as even the economists of “Team Transitory” admit, the situation seems closer to that of 1972. If, like Arthur Burns more than 50 years ago, Powell combines the alleviation of financial distress with a premature pause in monetary tightening, he risks repeating one of the key mistakes of the Fed in the Seventies.”

USAGOLD note: Ferguson points out that the Fed balance sheet expanded by $303 billion since the rescue plan was announced perhaps spelling the end of quantitative tightening. “Indeed,” he adds,” the BTFP might turn out to be just the latest iteration of Quantitative Easing. unless there is minimal take-up by banks.”