Jonathan Newman had a unique opportunity to meet with Federal Reserve Governor Christopher Waller during his visit to Auburn University. This encounter allowed Newman to ask questions not only during an informal lunch but also in a formal setting following Waller's public talk. The responses from Waller were often avoided direct answers, revealing inconsistencies in the Fed's stance on various issues.
1. Contrasting Conversations: Waller was more straightforward and casual during lunch compared to his polished public speech. His public remarks were typical of central banker rhetoric, while his informal comments were often dismissive.
2. Fed's View on Gold: Waller expressed that gold certificates are not of current value to the Fed, viewing them as outdated. He acknowledged that some foreign central banks are increasing their gold holdings due to waning trust in U. S. Treasuries, indicating a possible lack of confidence in dollar assets.
3. Inflation Targeting: When asked about the rationale behind the Fed's 2% inflation target, Waller's responses were clumsy. He ultimately reinforced a view that aligns inflation with government revenue, admitting it serves as a subtle tax on money.
4. Banking System Concentration: Waller showed little interest in discussing concentration in the banking system, stating he did not care about the number of banks.
5. Central Bank Digital Currency (CBDC): Waller criticized the idea of CBDCs and stated that there are no problems they would solve. He also rejected the notion that negative nominal interest rates could be imposed through a CBDC, asserting they would constitute an illegitimate tax.
6. Custodia Bank Denial: Waller had a negative view of Custodia Bank, a crypto-friendly institution, and argued against its eligibility for a Fed master account, contrasting this with Kraken, which was granted access.
7. Modern Monetary Theory (MMT): Regarding the MMT proposal of issuing a trillion-dollar platinum coin, Waller dismissed it and criticized MMT proponents while ignoring that the Fed's own actions post-COVID mirrored MMT principles.
8. Mortgage-Backed Securities (MBS): Waller admitted that the Fed’s MBS program since 2009 was a mistake causing credit distortion, signaling a shift in his defensiveness on such interventions.
9. Fed Funds Market: He acknowledged that the federal funds market is no longer functional, reflecting a change in the Fed's operational landscape.
10. Central Planning of Money: Waller failed to adequately answer why central planning of money is acceptable when other market interventions are typically criticized, resorting instead to justifying the Fed's capabilities to manage inflation.
11. Public Talk and Responses: During his formal talk, Waller reiterated points in a way that occasionally contradicted his earlier casual remarks, revealing a lack of transparency and a coherent framework guiding Fed policies.
Newman's interaction with Governor Waller highlights the contradictions and evasiveness often present in discussions about Federal Reserve policies. Waller's responses seemed to indicate a lack of clear and consistent principles underlying the Fed’s operations, revealing the complexities and challenges inherent in central banking discourse.
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