Without mentioning him by name, a prominent New York Times business writer took a shot at Tom Hoenig, the longtime president of the Federal Reserve Bank of Kansas City.
Hoenig raised his profile after the financial crisis, speaking out against supersized banks and warning about the perils of low interest rates. The Kansas City Star regards him as a populist oracle, who forges his ideas on the anvil of Midwestern goodness. But the Times' David Leonhardt makes a case that Hoenig and his like-minded central bankers are keeping people from finding work because they're fixated on the idea that inflation is just around the corner.
The Federal Reserve sets U.S. monetary policy with two goals in mind: Promote employment and keep inflation under control. At times, these goals come into conflict.
Hoenig worries about prices more than he worries about employment, and Leonhardt thinks the Fed has become captive to his way of thinking.
The result is a bias that can distort the Fed's decision-making. Just look at the last 18 months. Again and again, the inflation worriers, who are known as hawks, warned of an overheated economy. In one speech, a regional Fed president even raised the specter of Weimar Germany.Hoenig is the unnamed speechmaker.
In Leonhardt's opinion, Hoenig and other hawks who think we're going to be paying for bread and 5-Hour Energy drinks with wheelbarrows of cash are getting in the way of the recovery.
These warnings helped bring an end early last year to the Fed's attempts to reduce long-term interest rates -- even though the Fed's own economic models said that it should be doing much more. We now know, of course, that the models were right and the hawks were wrong. Recoveries from financial crises are usually slow and uneven. Yet the hawks show no sign of grappling with their failed predictions.The Star, meanwhile, continues to write about Hoenig as if he just stepped out of a Thomas Hart Benton painting. His Midwestern origins were noted yet again in a column by business editor Keith Chrostowski that was published on March 8.