The Celeri Journal #99: Main Street; Forgotten by the Fed

Written by Michael

On June 18, 2020

Global Markets Recap

The Federal Reserve has poured well over $5 trillion into the national economy due to COVID-19, yet some critics believe Wall Street is receiving an outsized proportion of those funds compared to Main Street.

From Bloomberg: “The Federal Reserve acted with “overwhelming force” to shelter the U.S. economy from Covid-19 but that has not done much to help the real economy so far, said former U.S. central banker Kevin Warsh.

“They seem to be incredibly aggressive even as risk assets are at incredible highs,” Warsh, who stepped down as a Fed governor in 2011, said Wednesday in an interview with Lisa Abramowicz. “I wish that same aggressiveness was being felt in the policies they are putting on Main Street.”

It’s certainly a fair point from a former central banker with the academic & professional track record to credibly make such an assessment. Mr. Warsh was always seen by bond traders as a respected, centrist voice when he served as a Fed Governor. During the 2008 crisis, he acted as the central bank’s primary liaison to Wall Street.

The idea of a “trickle-down” economy or the corresponding “rising-tide-lifts-all-boats” theory of economics is mostly campaign rhetoric; nearly endless attempts to spin a story. Millions remain out of work as mom-&-pop shops still need cash to reboot.

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