All my life, I've tried to under-promise and over-deliver. A lower bar is easier to clear, after all, and if you clear it by a lot, you're amazing! But also, I figure it builds credibility. Otherwise, my big talk wouldn't be worth very much.
(Speaking of which, this little newsletter I started from scratch last year now has over 75,000 subscribers!! I wouldn't have even dreamt of promising that, so thank you to all who have shared it with friends and colleagues. And thank you to Seth Harris, Ajay Rishi, and the rest of CNBC.com for the coding and homepage support.)
Anyhow, back to credibility. Apparently, the Fed's credibility works exactly the opposite way. They have promised the moon and that's been enough for investors, even though some of their biggest programs haven't actually begun yet.
Check out Steve Liesman's graphic below, which he detailed on our show yesterday; over $2 trillion in Fed programs has yet to launch, including the "Main Street" lending program (which they've just released details on) and their corporate and muni bond purchases."Do they even have to launch them now?" I joked. And we expanded on the point later with Bill Lee and Greg Ip.
In contrast to the Treasury's understandable rush to get the small biz PPP program up and running as quickly as possible to get funds into the economy, the Fed has been moving more slowly. The given reason for the delay on the "Main Street" program is so they can take public comments, learn from the PPP process, and avoid its mistakes. After all, the Fed's handouts via the banks could total ten times what PPP has been earmarked for so far.
But I'm starting to wonder if the delays serve a larger purpose for the Fed; their hope that financial conditions improve enough that they don't have to launch these sure-to-be messy and politicized programs at all, or at least to do so in a smaller, less ballyhooed way. "I think they're hoping to promise a lot, and do very little," Bill Lee said yesterday.
It's a strange way of building credibility, although we've seen it work for central banks before. Perhaps the most famous utterance in this vein was Mario Draghi's pledge early last decade that the European Central Bank would literally do "whatever it takes" to keep the euro zone intact as its debt crisis reached a climax.
As Greg noted yesterday, "The euro zone crisis was over before they bought a single bond."
Perhaps our Covid crisis will play out the same way.
See you at 1 p.m!