Twentieth-century modernist poet and Nobel Laureate T.S. Eliot inverts the typical notion of the start of spring in the opening stanza of his monumental masterpiece "The Waste Land":
April is the cruellest month, breeding
Lilacs out of the dead land, mixing
Memory and desire, stirring
Dull roots with spring rain.
Winter kept us warm, covering
Earth in forgetful snow, feeding
A little life with dried tubers.
The poem goes on to explore a psychological and cultural crisis rooted in such heavyweight themes like death, disillusionment and despair. Or at least that is what we remember from our high school modern poetry class with Mr. Rourke!
Now it should be noted here that Eliot wrote the poem during a period of convalescence in the coastal resort town of Margate in England. He suffered from a nervous breakdown and his doctor prescribed lots of rest and a break from his job.
What was his job at the time of the breakdown?
Eliot was a banker!
That's right, the greatest poet of the 20th century worked a nine-to-five gig in the foreign transactions department at Lloyd's Bank. Easy to see why he went crazy and the inspiration for all the death, disillusionment and despair in "The Waste Land."
Now the new top banker in the U.S., Jerome Powell, inverts the typical notion of a banker, with one thing in particular going for him: he has never worked a banking job. Powell, the new chairman of the Federal Reserve Bank is a lawyer by training and cut his teeth on Wall Street in private equity investing before being appointed to the Fed's Board of Governors by President Obama in 2011.
Not only does Powell lack a formal banking background, he is also the first non-academic/non-PhD economist to lead the Fed in pretty much forever. Based on comments in his inaugural press conference after the last Fed meeting in March, Powell will likely shake the institution up a little bit and lead in a manner very different than his academic predecessors, such as Janet Yellen, Ben Bernanke and Alan Greenspan.
Powell plans to call the economy in real-time by looking at the economic data as it rolls in to forecast when inflation is a problem and when an economic recession is beginning. He will be guided by the U.S. economy’s performance rather than the rudimentary and (perhaps) out-of-date theories and models relied upon by his predecessors to set monetary policy. He will know the economy is changing when he sees it.
And let’s face it: the theories and models used in the past have had a horrible track record. Of the 14 business-cycle expansions (including the current one) since the Fed has been in existence, the Fed's monetary policy tools have produced 12 recessions (the other recession was associated with the WWII economic demobilization). There were only three instances where the Fed was able to raise short-term interest rates to slow the economy and not put it into recession (the mid-1960s, the early 1980s and 1994).
Our guess is that Powell won’t do any worse than the Fed’s prior forecasting methods.
Nor will he likely write any Nobel prize-winning poetry!