The Fed Has Ruined The Free Market | Thomas Hoenig, Former Fed Exec

**Thomas Hoenig** (0:00)
I mean, I spent a career at the Fed, and I think it has real value, but its scope increased to where it is now dominating parts of the market. It's not a institution that provides liquidity in a crisis. It's now the market maker in many areas.

**Adam Taggart** (0:29)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Well, we've got a new US Presidential Administration with a very different economic strategy than its predecessor. The president has already started vocally demanding that the Federal Reserve be more aggressive in lowering interest rates, and he's appointed a new head, Scott Bessent, at the US Treasury, replacing Janet Yellen. What should we expect from the policies this administration intends to pursue?
Will Jerome Powell march to the president's demands, or will he flex to assert the Fed's independence? And where does inflation figure into all this? For a true experts-informed perspective on these very important questions, we've got the great privilege today of speaking with Dr. Thomas Hoenig, former CEO of the Kansas City Fed, former voting member of the Federal Open Markets Committee, a former director of the FDIC, and now a distinguished senior fellow at the Mercatus Center. Dr. Hoenig, thanks so much for joining us today.

**Thomas Hoenig** (1:27)
Thank you. Thanks for having me, and I look forward to the conversation.

**Adam Taggart** (1:30)
Thank you. Well, it's always very wonderful talking with you, Dr. Hoenig. And I do have to note too, I should start here with a thank you. Thank you so much for agreeing to participate in our upcoming Thoughtful Money Spring Online Conference. You will be joined in conversation by Danielle DiMartino Booth, who herself is a former advisor to the Federal Reserve. I think it was the Dallas Fed. But anyways, you two had a great discussion in our fall conference, and we're going to pick up right where we left off. So thank you for making yourself available for that.

**Thomas Hoenig** (2:01)
She's a good friend and a great interviewer, so I look forward to it.

**Adam Taggart** (2:05)
Okay, great. Well, I do too. I always learn so much when I hear you two talk.

**Thomas Hoenig** (2:08)
All right.

**Adam Taggart** (2:08)
Well, look, as I mentioned in the intro, there's a lot of new things to talk about since we last had you on the program. So I'd like to dig into each of those with you. But if we can, let's just start with the general question I like to kick these discussions off with. What's your current assessment of the global economy and financial markets?

**Thomas Hoenig** (2:26)
Well, I think that's a hard question in many ways, because from first perspective, on the US economy, which really drives much of the global economy, the US economy is strong. I mean, it's leaving 2024 in a very strong record, and it's entering 2025 with a strong record. I would expect that will continue. I think the consumer is still consuming, and our nominal and real wages are still improving. That means the consumer should be able to stay engaged. Investment is really generally good. It's been growing, and I suspect it will grow even more as the demand for technology increases and so forth. So I think the US will have a very strong year. Now, the rest of the world is a little less, shall we say, strong. That's putting it nicely. Europe is struggling. It has been for some time, and I think it will going forward. China, which, you know, besides all the other issues between US and China itself is having some adjustment issues that it has to get through. It's been very kind of deflationary move. So that is going to continue, I think, for a while, despite recent events. And I think the economies to our north, Canada and Mexico, are also less, shall we say, robust than US. So it's really the US and then the world following that. But I am optimistic about the US economy going forward and all this going on there. So that's kind of my broad assessment of the US and global economies.

**Adam Taggart** (4:16)
Okay. And I know you're more of an economist. You look at the economy much more than you look at the financial markets. But do you have an opinion on the current state of the financial markets?

**Thomas Hoenig** (4:25)
Well, I think the financial markets are stable, but I think they're vulnerable. There's a lot of leverage. There's a lot of, shall we say, uncertainty around the global economy, and therefore a little bit also uncertainty around the presidential transition and what the future holds. So I think those are issues that could change things. For example, the banking industry in the United States, there's a great deal of talk about how well capitalized it is. It is capitalized better than it was before, but it still has growing non-performing assets, especially in the commercial real estate field and some other fields. So it's not as robust as I think people say, but it is stable and that's essential for the growth overall of the US economy. It has to be there and it is. I think that will continue unless there's a major shock to the global or to the US economy, which I don't see coming.