Powell's Problem? 'He Can't Print Jobs,' Says Fed Watcher

Danielle DiMartino Booth. (Photo: Alejandro Cegarra/Bloomberg)

“The Federal Reserve is stuck in the middle,” said Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence and a former advisor to the Federal Reserve.

Speaking about Fed Chairman Jerome Powell on a Hedgeye webcast Thursday, she explained: “He wants to print more money, because he wants to put it into the hands of the lowest third of income earners.”

Powell also “wants to keep his facilities open that violate the Federal Reserve Act and buy junk bonds, because he wants to keep Wall Street happy,” DiMartino Booth said.

“So, he wants to keep the wealthiest happy, and he wants to print money to give to the lowest income earners in the economy. He cannot print jobs in the middle, and that is the problem,” she explained. 

“He can’t print jobs. He can’t print cash flow. And he can’t print these small businesses back into business that the PPP failed,” the Fed critic said, referring to the Paycheck Protection Program. 

Powell “practically begged” for stimulus legislation to be passed by Congress during his appearance on the CBS show “60 Minutes” this past Sunday, she added. 

He “can’t get enough traction, because we’re getting closer and closer to Election Day,” and neither the Republicans nor Democrats want to give in to the other side when it comes to new stimulus dollars, DiMartinoBooth explained.

Powell’s Blind Spots 

Powell’s “naivete right now is very dangerous,” she said, pointing to his support for the expanded Main Street Lending Program. 

The private equity firms that lobbied for it “were trying to make sure that the companies that pay them dividends didn’t have to go out of business,” the Fed expert said.

“Powell thinks that he’s keeping those employees employed,” she explained. “But what he’s really doing is bailing out the big private equity guys, so that they can continue to pay themselves one-time dividends [and] load these companies up with debt and make them that much more dangerous.”

When this situation deteriorates much further, “there is no Chapter 11 route,” DiMartino Booth said. “They’re just going to have to liquidate.”

Unemployment Update

It’s not the high numbers of Americans who’ve filed for unemployment insurance that’s so concerning, as the fact that those high numbers are continuing for so many weeks now, she explained. 

The number of Americans who’ve filed for unemployment during the pandemic has now reached about 40 million, according to the Fed critic.

“Twenty-eight percent of the U.S. workforce has applied for unemployment insurance,” she explained.”What I’m following more closely is the persistence. So if we’re nine weeks into this and we’re still seeing initial claims coming in at these levels, then you are cutting into the bone at this point.”