“The Fed missed the boat on this one.”
That’s how Gulf Coast Bank & Trust president Guy Williams described the Federal Reserve’s response to 2020’s COVID shutdown on WWL Radio’s Newell Normand Show, a response that he says is influencing the dramatic rise in inflation across the country.
“We had a crisis, and certainly the onset of COVID, the global shutdown caused everybody to be afraid that there might be a ‘Great Depression’ that would span the entire globe,” Williams said. “So appropriately enough, both Congress and the Fed threw the kitchen sink at the problem.”
Williams noted the variety of measures the federal government took to avoid an economic downturn amid a stalled economy: the PPP program to inject money into small businesses and stimulus checks to bolster citizens’ bank accounts among them.
He said the variety of solutions did what they were supposed to do, and economic recovery has been “an absolute V-shaped rocket ship.”
“The economy roared back, and consumption and spending were higher than ever,” Williams said, and that’s when Williams believes the Federal Reserve should have backed off.
“But they kept buying bonds, which kept pushing more money into the economy,” Williams said. When coupled with the high demand for goods and the short supply due to other countries who were slower to reopen their own economies, it was a recipe for rising prices.
“You had both too much demand and too little supply simultaneously, and it didn’t take a rocket scientist to realize this is going to cause inflation,” Williams said.
But in Williams’s opinion, the Federal Reserve ignored the warning signs.
“They said since inflation has been below 2 [percent] for a while, we’re going to be happy if it’s above 2 for a while. So then it will be, on average, 2%,” Williams said. “What they thought they meant was, ‘We’ll let it go to 3%.’ But once it escapes, it’s very hard to contain inflation.”
Paired with the exodus of older employees, as well as unhappy ones, from the workforce, Williams said the economy is in danger of getting fully out of the control of the Federal Reserve.
“The Fed missed the boat on this one, and the challenge is how do you make a soft landing?” Williams posited.
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