Former Fed Official: The Fed’s Biggest Mistake Wasn’t Rate Cuts. It Was Keeping Them Low Too Long.

Jeremy Phillips

Tue, May 19, 2026 astatine 11:08 AM CDT 5 min read

For overmuch of the post-2008 era, Wall Street treated zero involvement rates arsenic a imperishable diagnostic of the landscape, a benignant of monetary gravity that pulled each plus terms higher. Stocks ran. Bonds ran. Private recognition ran. The benchmark S&P 500 vaulted disconnected its 2009 debased portion the technology-packed Nasdaq Composite did adjacent better. But the antheral who sat wrong the country wherever those decisions were made spent the full agelong voting against them, and helium is inactive arguing contiguous that the argumentation itself was little destructive than the refusal to discontinue it.

Tom Hoenig, erstwhile president of the Kansas City Fed and a sitting subordinate of the FOMC successful 2010, dissented astatine each FOMC gathering successful 2010. He sat astatine the table, raised his hand, and voted no. On a caller occurrence of Thoughtful Money with Adam Taggart, Hoenig delivered the enactment that frames his full career-long argument: "It isn't the crisis. It's the post-crisis erstwhile you don't set your argumentation backmost to normal."

His instrumentality seems to be: Cutting rates to the level successful 2008 was defensible. Keeping them pinned determination done 2016 is what bent the system retired of shape.

The 2010-2016 lawsuit survey

Hoenig keeps returning to 1 stretch. "While they were doing quantitative easing en masse during those years, existent productivity successful the system went level and existent wage increases went flat. You had to have, you had to beryllium an plus holder to beryllium a winner." The Fed's equilibrium expanse ballooned, plus markets ripped, and the wage earner lasting extracurricular the plus system got thing for the wait.

History tells america this signifier repeats. The 1970s Fed nether Arthur Burns refused to tighten meaningfully, convinced ostentation was a transitory cost-push occupation alternatively than a monetary one. The effect was a decennary of stagflation that took Paul Volcker and a brutal recession to break. Japan, aft its 1989 bubble burst, rolled exigency accommodation guardant into 1 mislaid decade, past a second, past a third, and its equity scale spent thirty-four years climbing backmost to its 1989 high. Post-WWI Europe ran the wealth printers to insubstantial implicit warfare debts and produced the Weimar inflation. The mechanics is the aforesaid each time: exigency argumentation that becomes imperishable argumentation reliably produces wealthiness attraction and governmental fragmentation.

The information contiguous rhymes

M2 wealth proviso sits astatine $22.69T arsenic of March 2026, the precocious constituent of the past twelvemonth and the 90.9th percentile of the 12-month window. Corporate profits deed $4,352.1B successful 2025 Q4, up 9.6% year-over-year. The savings complaint has compressed from 6.2% successful 2024 Q1 to 4.0% successful 2026 Q1. Average hourly net person climbed from $34.47 successful January 2024 to $37.41 successful April 2026, but the CPI has tally from 320.62 successful May 2025 to 332.4 successful April 2026, chewing done astir of the nominal gain. Asset holders kept winning. Wage earners ran connected a treadmill.