Federal Reserve Board Governor Jerome Powell, who has been nominated by Donald Trump to succeed Janet Yellen as the next Federal Reserve chairman, is an unusual choice for a number of reasons. First, Powell is not an academic economist but rather an investment banker who understands the financial markets. Second, unlike his tight-lipped predecessors going back several decades to Paul Volcker, Powell is quite forthright in his public statements.
For example, in the October 2012 Minutes of the Federal Open Market Committee, Powell openly worried about how the Fed's massive purchases of securities would impact the markets. He said:
[W]hen it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it's not so much the sale, the duration; it's also unloading our short volatility position.
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