Greg Ip

speaker

528 appearances 8 recordings 1 series first heard Jan 2018 last heard Sep 2024

Greg Ip’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Should Incoming Fed Chair Powell Prepare for a Bust? · 12 Jan 2018 podcast

And that's one of the reasons why interest rates have been at or near zero for the last seven or eight years and why the Fed is really taking its sweet time about raising them now. voice-verified

But the more slowly it raises interest rates, the more it kind of gives comfort to those who want to bid voice-verified

The price of stocks and property or Bitcoin, for that matter, ever higher. voice-verified

And what Powell has in common with his predecessors, as you point out in your column, is that he sees monetary policy as a last resort tool.

But he also seems to have more vigilance than past Fed chairs.

What exactly did you mean by that?

Well, central bankers have known for some time that it's a very tricky issue about what to do with an asset bubble. voice-verified

On the one hand, you could say, let's try and preempt this. voice-verified

Let's lean against that bubble, raise interest rates now, because that way we prevent the bubble from inflating in the first place. voice-verified

And then you're not confronting the damage when it bursts. voice-verified

But then they think that through and they say, well, gosh, maybe I'm going to do more damage by trying to prevent the bubble than just letting it burst on its own. voice-verified

And so by and large, voice-verified

whether it was Janet Yellen or Ben Bernanke or Alan Greenspan, the previous Fed chairman, they've more or less said, now we'll just sort of like focus on inflation and unemployment like we always do, and we just won't deal with asset prices through interest rates. voice-verified

Instead, the preferences will use regulation, will force banks, for example, to hold more capital in case there's some, you know, collapse in asset values that impairs their loan portfolios. voice-verified

Powell, yes, does by and large share that sequence of priorities. voice-verified

But in his private and public remarks, he seems to be more open to the idea that there might be a role for monetary policy in preventing bubbles from forming. voice-verified

We know from transcripts to the 2012 meetings that one reason he was very uneasy about quantitative easing, which is the effect of going out and buying bonds, is that he was afraid that it would engender more risk-taking many years down the road. voice-verified

And arguably that is what happened. voice-verified

And he's given several speeches where he said you just can't rule out the use of monetary policy to limit risk-taking. voice-verified

And while I've seen nothing from him to suggest that he's anywhere near that sort of decision now, it feels to me that if you look at the behavior of asset prices, you've got to be a little bit more worried than you were a few years ago. voice-verified

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